Corrections & Clarifications: An earlier version of this story incorrectly listed among states with no Social Security tax Minnesota, which expanded in May 2023 a state tax exemption for benefits without eliminating the tax.
For many retirees, Social Security benefits – or at least some of them – are subject to federal income tax. Depending on your income after retirement, you may have to pay federal income tax on as much as 85% of your Social Security income.
But what about state taxes? Are you going to pay tax on your Social Security benefits to the IRS and pay even more tax when you file your state tax return?
The short answer is it depends where you live. Some states tax Social Security income, and others don't. Here's a rundown of the states that don't tax Social Security, those that do, and what to keep in mind when looking at your potential tax situation after retirement.
There's good news for retirees in most states. 39 states plus the District of Columbia don't tax Social Security benefits at all. Depending on your income and other tax situations, you might still have to pay tax on your Social Security income at the federal level, but in the bulk of U.S. states, you won't pay any tax on Social Security benefits whatsoever.
I won't keep you in suspense. Here are all 38 states (and D.C.) that don't tax Social Security benefits at all, listed in alphabetical order:
Alabama
Alaska (no income tax at all)
Arizona
Arkansas
California
Colorado (as of 2023)
Delaware
Florida (no income tax at all)
Georgia
Hawaii
Idaho
Illinois
Iowa
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Mississippi
Nevada (no income tax at all)
New Hampshire (no income tax at all)
New Jersey
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
South Carolina
South Dakota (no income tax at all)
Tennessee (no income tax at all)
Texas (no income tax at all)
Virginia
West Virginia
Wisconsin
Washington (no income tax at all)
Washington, D.C.
Wyoming (no income tax at all)
How much will you pay in other states?
This leaves 11 states that do tax Social Security income. However, it's important to mention that while a few states use the same general tax guidelines as the IRS when it comes to taxable Social Security income, most of the states that have a tax on Social Security benefits use different methods – and usually they are in retirees' favor.
For example, Kansas exempts Social Security income unless your adjusted gross income (AGI) is over $75,000. New Mexico's income thresholds are $100,000 for single filers and $150,000 for married couples filing joint tax returns. And Nebraska is scheduled to phase out taxes on Social Security income by 2025.
As we've seen, most states don't tax Social Security income at all. But as residents in many of these states can tell you, this is only one aspect of how tax-friendly a state is to live in. Some of the states on the list, such as Florida and Texas, are generally lower-tax places for retirees to live. On the other hand, states like New Jersey and New York don't tax Social Security but have high taxes of other kinds that could cost retirees a lot of money.
The bottom line is that if you're trying to assess the tax friendliness of the state you currently live in and/or states you might consider living in after you retire, it's important to look at property taxes, sales taxes, and all of the other types of tax you might have to pay to get the complete picture.
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While you may have heard at some point that Social Security is no longer taxable after 70 or some other age, this isn't the case. In reality, Social Security is taxed at any age if your income exceeds a certain level.
Taxes aren't determined by age, so you will never age out of paying taxes. Basically, if you're 65 or older, you have to file a tax return in 2022 if your gross income is $14,700 or higher. If you're married filing jointly and both 65 or older, that amount is $28,700.
Social security benefits are not taxable by the State of California. Social security benefits may be taxable by the federal government. Railroad sick pay is also not taxable by the State of California. It is taxable by the federal government unless it is a payment for an on the-job-injury.
Unless your combined income for 2024 is less than $25,000 (less than $32,000 for married couples filing jointly), a percentage of your Social Security payments will be subject to income tax.
If Social Security is your sole source of income, then you don't need to file a tax return. However, if you have other income, you may be required to file a tax return depending on the amount of other income.
Taxes aren't determined by age, so you will never age out of paying taxes. Basically, if you're 65 or older, you have to file a return for tax year 2023 (which is due in 2024) if your gross income is $15,700 or higher.
You may have to pay federal income taxes on a portion of your Social Security benefits if you have other substantial income in addition to your benefits (such as wages, self-employment, interest, dividends, and other taxable income that must be reported on your tax return).
Mississippi: According to World Population Review, in 2023, Mississippi holds the title of the cheapest state to live in the United States. Its cost of living index is 85, and overall costs in the state are 17% lower than the national average.
Based on its high marks for affordability, access to high quality health care, overall well-being and other categories, Delaware, known as the "First State," earned the top spot in Bankrate's annual ranking of the best states to retire in the U.S. In 2023, the state ranked No.
MoneyGeek's analysis found that Wyoming is the most tax-friendly state in America, followed by Nevada, Tennessee, Florida and Alaska. Except for Arizona, states that received a grade of A all share something in common: no state income tax. Texas — which received a B — also has no state income tax.
Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming do not levy state income taxes, while New Hampshire doesn't tax earned wages. States with no income tax often make up the lost revenue with other taxes or reduced services.
Bankrate's annual Best and Worst States to Retire Study found that Delaware is the best state for retirees in 2024, followed by West Virginia (2), Georgia (3), South Carolina (4) and Missouri (5). Delaware moved from second to first place this year, and Iowa — our No. 1 state last year — dropped to ninth place.
Introduction: My name is Nathanael Baumbach, I am a fantastic, nice, victorious, brave, healthy, cute, glorious person who loves writing and wants to share my knowledge and understanding with you.
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