Which States Don’t Tax Social Security Benefits?

Source: Social Security Administration

Income from other retirement programs also may be subject to federal income taxes. Pension payments, for example, are fully taxable or partially taxable, depending on how much in after-tax dollars the individual or the employer invested in the contract.

Spousal Social Security benefits and Social Security disability benefits follow the same basic rules as the primary Social Security program. The amount subject to federal income taxes (up to 85%) is dependent on the retiree’s total income. Supplemental security income, which is paid primarily to low-income disabled adults and children, is not taxed.

Who Doesn’t Pay Taxes on Social Security Income?

If you’re wondering if there’s anywhere in the U.S. where Social Security benefits won’t be taxed at all, by the federal government or the state, the answer is no.

The only way to avoid paying taxes on Social Security income is by remaining below the minimum taxable income threshold, and those are very low. Individuals with a combined income of more than $25,000 and couples with a combined income of more than $32,000 are required to pay some taxes on a portion of their Social Security income. That portion tops off at 85%.

Can the Federal Social Security Tax Be Avoided?

It is possible to at least decrease if not eliminate the taxes due on Social Security income with plenty of advance planning. For example, saving for retirement in a Roth 401(k) or IRA account yields withdrawals that are tax-free. Some use qualified longevity annuity contracts (QLACs).

The alternative is living on a shoestring.

Moreover, retirees in a dozen states may have to pay some state taxes on these benefits. The laws vary from state to state but most exempt those with lower incomes and levy a tax on only part of the person’s Social Security income, not on all of it.

Social Security Benefit Taxation by State

Out of all 50 states in the U.S., 38 states and the District of Columbia do not levy a tax on Social Security benefits. Nine of those states don’t collect state income tax at all. They are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.

Below is a list of the 12 states that levy a tax on Social Security benefits, with details on each state’s policy.

• Colorado: Colorado taxes Social Security benefits only on recipients under age 65. The tax rate is a flat 4.4%.
• Connecticut: Connecticut’s Social Security income tax rate ranges from 3% to 6.99%. Depending on AGI and filing status, retirees are able to deduct most or all of their benefit income. Specifically, beneficiaries pay no state taxes on their benefits if their AGI is less than $75,000 (for a single filer) or $100,000 (for a married couple filing jointly.) Above these thresholds, 75% of Social Security income is still tax-exempt.
• Kansas: Social Security benefits are taxed at the same rate as all other forms of income, with the tax rate ranging from 3.1% to 5.7%. Retirees with an AGI of up to $75,000 are exempt from paying state taxes on their Social Security income, regardless of their filing status.
• Minnesota: Minnesota uses the same thresholds as the federal government for determining how much of a retiree’s Social Security benefits should be taxed. Additionally, those who do owe taxes on their benefits can take advantage of Minnesota’s Social Security Subtraction to secure a partial deduction. In 2022, single filers and couples filing jointly can exempt up to $4,260 and $5,450, respectively, of their federally taxable benefits from their Minnesota income. This is unavailable for residents in higher income brackets. Single filers and couples filing jointly with AGIs of at least $64,670 and $85,970, respectively, only qualify for partial exemption, while those with incomes above $85,9700 and $110,020, respectively, are not eligible. Minnesota’s Social Security income tax ranges from 5.35% to 9.85%.
• Missouri: Missouri’s Social Security income tax rate can be as high as 5.3% and as low as 0%. Single filers and couples filing jointly who are age 62 and older with AGIs of less than $85,000 and $100,000, respectively, will be able to fully deduct their Social Security benefits. Those in higher income brackets may qualify for a partial deduction.
• Montana: In Montana, the Social Security income tax rate ranges from 1% to 6.75% for the 2022 tax year. As with the federal tax, retirees with an AGI of less than $25,000 (single filer) or $32,000 (married filing jointly) are not subject to tax on their Social Security benefits. This is not the case for residents in higher income brackets. Montana uses a different method than the federal government to calculate the amount that someone owes (the state tax form provides a worksheet). The tax rate will drop to 5.9% for the 2024 tax year.
• Nebraska: Nebraska’s tax on Social Security is gradually being reduced under a plan that kicked in for the 2021 tax year and continues through 2025. The tax may be eliminated altogether by 2030. For the 2023 tax year, the rate ranges from 2.46% to 6.84%. Single filers and couples filing jointly are exempt from taxes on Social Security benefits if their AGIs are less than $45,790 and $61,760, respectively.  
• New Mexico: New Mexico taxes Social Security income at a rate of 1.7% to 5.9%. Like Montana, New Mexico uses the same thresholds as the federal government for exempting lower-income taxpayers. For higher income brackets, Social Security benefits are considered the same as other forms of income for tax purposes. However, single filers and couples filing jointly age 65 and older with AGIs of up to $28,500 and $51,000, respectively, may deduct up to $8,000 in income, which includes Social Security payments.
• Rhode Island: Rhode Island taxes Social Security income at a rate of 3.75% to 5.99%. However, the state doesn’t tax the benefits of retirees who are of full retirement age (i.e., 66–67 years old, depending on the year born) and earn an AGI of less than $95,800 (single filer) or $119,750 (married filing jointly).
• Utah: With a tax rate of 4.65%, Utah, like Minnesota, uses the same formula as the federal government for determining how much of a retiree’s Social Security benefits ought to be taxed. However, Utah offers a partial or full credit on taxable benefits. Single filers and couples filing jointly with AGIs of less than $45,500 and $75,000, respectively, are eligible for a full tax credit on their benefit income in 2023. Those in a higher income bracket still get a partial tax break, with the credit decreasing by 25 cents for each dollar above the income limits.
• Vermont: In Vermont in 2022, single filers with an AGI of up to $50,000 are eligible for a full exemption from state taxation of their Social Security benefits, while those who make $50,001 to $59,999 qualify for a partial exemption. For couples filing jointly, the full exemption applies for those with an AGI of up to $65,000 and is phased out for those with incomes ranging from $65,001 to $74,999. For single filers and couples filing jointly earning at least $55,000 and $70,000, respectively, benefits are fully taxed at the state rate of 3.35% to 8.75%.
• West Virginia: West Virginia’s tax rate on Social Security income ranges from 3% to 6.5%. However, the state is slowly phasing out income taxes on Social Security benefits for lower-income residents. Starting with the 2022 tax year, single filers earning up to $50,000 and couples earning up to $100,000 can deduct 100% of their Social Security benefits from their state income. Retirees with AGIs above those thresholds will have their benefits taxed based on the federal model.

Are States That Tax Social Security Benefits Worse for Retirees?

Including Social Security benefits in taxable income doesn’t necessarily make a state a more expensive place to retire.

According to the Missouri Economic Research and Information Center, as of the first quarter of 2023, while four of the states that tax Social Security benefits have notably high cost-of-living index scores, the remaining eight fell within the two lowest-scoring groups.

Kansas, in particular, had the third-lowest score in the U.S., after Oklahoma and Mississippi.

The inverse is also true, as states that don’t levy a Social Security tax aren’t inherently less expensive or even tax-friendlier places to live. When a state government doesn’t garner income from one potentially taxable source, it typically makes up for it with other forms of taxation.

For instance, while Texas doesn’t have a state income tax (thereby precluding a Social Security income tax), it relies heavily on taxes from a variety of other sources. These include insurance taxes, sin taxes on some beverages, tobacco products, and slot machines, and gasoline taxes.

Other states that don’t earn revenue from Social Security income—such as Arkansas, California, Louisiana, and New York—have some of the highest income or sales tax rates in the U.S.

What might be an affordable place to live for one person may not be for someone else with different requirements, interests, and circumstances. Other important factors to keep in mind include crime rates, climate, and proximity to friends and family members.

The Bottom Line

State taxes on Social Security, or the absence of them, shouldn’t be the sole motivating factor when deciding on a long-term retirement residence.

In any case, consider the individual state’s policy. It may omit lower incomes from the tax, tax only part of the Social Security income, or both. Moreover, check out the state’s other taxes. A state that doesn’t tax one source of income usually goes looking for another to tax.

Be sure to research other comparative costs in various locations you’re considering, such as housing and healthcare prices.

And don’t forget about all of the other quality-of-life considerations that go into choosing a retirement home, such as weather, community services, cultural attractions, and healthcare quality.