37 States That Don't Tax Social Security Benefits

The Motley Fool
The Motley Fool

It's a good goal to retire with your mortgage paid off so you don't have mortgage payments hanging over your head while you're on a more fixed income in retirement. It can also be very helpful to not have your Social Security benefits taxed.

Fully 37 states -- plus the District of Columbia -- don't tax Social Security benefits. See whether your state does -- and if so, if it taxes benefit holders in a meaningful way.

Image source: Getty Images.

The 37 states that don't tax benefits

Here are the 37 states that do not tax your Social Security benefits:

  • Alabama
  • Alaska
  • Arizona
  • Arkansas
  • California
  • Delaware
  • Florida
  • Georgia
  • Hawaii
  • Idaho
  • Illinois
  • Indiana
  • Iowa
  • Kentucky
  • Louisiana
  • Maine
  • Maryland
  • Massachusetts
  • Michigan
  • Mississippi
  • Nevada
  • New Hampshire
  • New Jersey
  • New York
  • North Carolina
  • Ohio
  • Oklahoma
  • Oregon
  • Pennsylvania
  • South Carolina
  • South Dakota
  • Tennessee
  • Texas
  • Virginia
  • Washington
  • Wisconsin
  • Wyoming

If you live in any of the states above (or the District of Columbia), you don't have to worry about handing over part of your precious Social Security check. Some of them simply don't tax income at all. These include Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. The rest do have an income tax, but they exclude Social Security benefits from taxable income.

The 13 states that do tax benefits

Here are the 13 states that do tax benefits:

  • Colorado
  • Connecticut
  • Kansas
  • Minnesota
  • Missouri
  • Montana
  • Nebraska
  • New Mexico
  • North Dakota
  • Rhode Island
  • Utah
  • Vermont
  • West Virginia

Fortunately, things may not be as bad as you fear -- because many of these states do not have a heavy hand when it comes to taxing your benefits. In more than a few of them, it's only the wealthier residents that will face a tax, and/or the tax will be relatively little. For example:

  • In Missouri, those who are 62 years old or older (or who are collecting Social Security disability income) and whose income is less than $85,000 for single filers or $100,000 for those filing jointly can exclude 100% of their Social Security income from their state taxes.
  • In Colorado, residents who are at least 55 years old may take advantage of the "pension and annuity subtraction," which permits the subtraction of up to $20,000 to $24,000 in income (depending on age), with Social Security income eligible for the subtraction. The $24,000 limit applies to those 65 and older. Keeping in mind that the average monthly Social Security retirement benefit check was recently only $1,564, or close to $18,800 annually, this rule will remove all of many Coloradans' benefits from taxation.

Uncle Sam might tax your benefits

But while you're not likely to face much taxation of your Social Security benefits at the state level, the U.S. government does tax some retirement income , including Social Security. Up to 85% of your benefits can be taxed. To determine whether you'll face any taxation, you'll need to calculate your "combined income," which is your Adjusted Gross Income (AGI), plus nontaxable interest, plus half of your Social Security benefits.

This table shows the thresholds for taxation:

Filing As

Combined Income

Percentage of Benefits Taxable

Single individual

Between $25,000 and $34,000

Up to 50%

Married, filing jointly

Between $32,000 and $44,000

Up to 50%

Single individual

More Than $34,000

Up to 85%

Married, filing jointly

More Than $44,000

Up to 85%

Source: Social Security Administration.

Many people misunderstand this, thinking that they may face a tax rate of 50% or 85%. That's not the case. Those are the portion of your benefits that would count as taxable income. The tax rate they'd face would be your income tax rate.

Most of us needn't worry too much about Social Security taxation. But it is well worth spending some time learning more about Social Security and about how you might increase your benefits .

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