For many retirees, learning that the federal government occasionally taxes Social Security benefits can be a rude awakening. Some people may find it even more surprising that some states also impose their own income taxes on Social Security benefits. Fortunately, there aren’t many states that fit this description. Even states that do tax Social Security frequently offer exemptions or other means to lessen or completely avoid the tax, usually based on an individual’s age or income. The states without Social Security taxes are listed below.
States That Don’t Tax Social Security
The District of Columbia and 37 states do not tax Social Security benefits. These nine states—which are among the nine that have no income tax at all—include:
- New Hampshire
- South Dakota
It should be noted that New Hampshire does not tax wages or Social Security benefits, but it does impose a 5% tax on investment income (dividends and interest earned).
To assist taxpayers in avoiding state-level Social Security taxes, the remaining 32 of those 37 states—plus the District of Columbia—implement various credits or exemptions. These are the states:
- New Jersey
- New York
- North Carolina
- North Dakota
- South Carolina
- West Virginia
- Washington, D.C.
You won’t have to pay state taxes on your Social Security income if you live in any of these states or the District of Columbia.
States That Reduce Social Security Taxation Based on Age or Income
Retirees between the ages of 55 and 64 can deduct up to $20,000 in retirement income, including Social Security benefits, while those 65 and older can deduct up to $24,000. Colorado residents can now deduct all federally taxable Social Security benefits beginning this year.
- According to Investopedia, retirees with an adjusted gross income of less than $75,000 for a single filer and $100,000 for joint filers can deduct most or all of their benefit income. People who earn more than these thresholds can still deduct 75% of their Social Security benefits.
In Kansas, regardless of filing status, if your adjusted gross income is $75,000 or less, you do not have to pay state taxes on your benefits.
According to SmartAsset, while Social Security is taxable in Missouri, many seniors will not have to pay it, particularly those with an adjusted gross income of less than $85,000 (single filers/heads of household) or $100,000 (joint filers).
Social Security benefits are taxable for many Montana retirees. According to SmartAsset, taxpayers who make less than $25,000 (single filers) or $32,000 (joint filers) can deduct 100% of their Social Security retirement income.
According to SmartAsset, Social Security benefits are still taxable in Nebraska, but on a sliding scale based on adjusted gross income. [x] However, thanks to recent legislation, the state income tax on benefits will be phased out by 2025, according to AARP.
- New Mexico
According to Veteran.com, low-income retirees 65 and older in New Mexico can take a $8,000 exemption on Social Security if their adjusted gross income is $28,500 (single filer) or $51,000 (joint filers).
- Rhode Island
According to AARP, you do not have to pay Social Security taxes in Rhode Island if you have reached full retirement age and have an adjusted gross income of less than $86,350 (single filers/head of household) or $107,950 (joint filers).
According to AARP, Vermont lawmakers recently voted to raise the income threshold that would exempt retirees from paying taxes on their Social Security benefits. Single filers with an adjusted gross income of $50,000 or less are no longer required to pay state taxes on their benefits. A partial exemption is available if you earn between $50,000 and $60,000 per year.
Joint filers can get the full exemption if their income is less than $65,000, and a partial exemption if their income is between $65,000 and $75,000.
Utah: Recent Changes
The only state that taxed Social Security benefits in the same manner as the federal government until 2021 was Utah. According to the federal government’s system, Social Security benefits were taxed according to a formula that took into account a taxpayer’s filing status and the amount of their “combined income,” which was made up of their adjusted gross income, nontaxable interest, and half of their Social Security benefits. The state has recently given in, though, and is now using its own income-based tax credit system to offset Social Security income for single filers earning under $30,000 and joint filers drawing under $50,000.