Taxes on Social Security Across States
Alaska, Nevada, Washington, and Wyoming don’t have state income taxes at all. Arizona, California, Hawaii, Idaho, and Oregon have special provisions exempting Social Security benefits from state taxation. Minnesota and Utah are the only states that tax Social Security benefits using the same income thresholds as the federal government. It’s important to remember that states without a Social Security tax aren’t necessarily better places for retirees to live due to other financial factors like the cost of housing and cost of living.
In contrast, the following eleven states tax some or all of their residents’ Social Security benefits: Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, and West Virginia. Colorado taxes Social Security benefits but makes them fully deductible for recipients age 65 and above.
Corrections & Clarifications: An earlier version incorrectly listed Minnesota, which expanded a state tax exemption for benefits without eliminating the tax.
The tax implications on your Social Security benefits can depend on where you live since some states tax Social Security income, and others don’t.
Benefits of Residing in Certain States
Florida is considered tax-friendly as it does not have state income tax, meaning retirees do not have to pay any state taxes on their retirement income. Delaware is seen as a tax haven for retirees with no sales tax and death taxes. Mississippi, known for its low cost of living — Jackson, in particular, had a low median monthly rent under $800 — offers some of the most affordable living conditions for retirees.
Here are the 37 states that do not tax your Social Security benefits: Alabama and Alaska. Other states offer exemptions based on age or income.
Alaska is considered the most tax-friendly state for retirees due to its lack of a state income tax or tax on Social Security. Delaware is also a tax haven for retirees, with no sales tax, low property taxes, and no death taxes. Wyoming tops the list as one of the lowest tax states for residents of any age, having no state income tax and offering tax exemptions on groceries and prescriptions.
Retirement Tax Considerations
When planning retirement, taxes can play a significant role in decision-making. States like Arizona offer favorable conditions for retirees, especially those with military pensions. Florida and Texas are also tax-friendly to retirees, not taxing Social Security or pension incomes. By 2024, even more states will stop taxing Social Security benefits, allowing seniors to retain more of their income.
Overall, 37 states do not tax Social Security benefits, and The Last Frontier (Alaska) is heralded as the most tax-friendly state for retirees in 2023.