One of the perks of working for so many years is that at retirement age you can finally start to take your Social Security benefits. While you can begin to receive Social Security income as early as age 62, the longer you wait, the closer you get to receiving your full benefits, up to age 70. While this income may not be enough to live on by itself, it’s a welcome addition to most retirees.
Therefore, it can be a rude awakening to many retirees to learn that the federal government, in certain circumstances, taxes Social Security benefits. Even more surprising to some is that certain individual states also apply their own income tax to Social Security payouts. Fortunately, not many states fall into this category. Even those that do tax Social Security often provide exemptions or ways to reduce or eliminate the tax, typically based on age or income. Here’s a list of the states that don’t tax Social Security.
States That Don’t Tax Social Security
Most states — plus the District of Columbia — do not tax Social Security benefits. These states include the nine that don’t have any income tax at all, which are:
- New Hampshire.
- South Dakota.
Note that while New Hampshire does impose a 5% tax on investment income (dividends and interest earned), it does not tax wages or Social Security payouts.
The remaining states, plus the District of Columbia, implement various credits or exemptions to help taxpayers avoid state-level Social Security taxes. These states are:
- Colorado: Previously, Colorado worked around straight up taxing Social Security by allowing $24,000 of Social Security income to be deducted from state taxes. According to Colorado Public Radio, the current deduction is “unlimited, effectively eliminating state taxes on Social Security for people over 65.”
- New Jersey.
- New York.
- North Carolina.
- North Dakota.
- South Carolina.
- West Virginia.
- Washington, D.C.
If you live in any of these states — or the District of Columbia — you won’t have to worry about paying state taxes on your Social Security income.
States That Reduce Social Security Taxation Based on Age or Income
Retirees whose adjusted gross income is than $75,000 for a single filer and $100,000 for joint filers can deduct most or all of their benefit income, according to Investopedia. For people who make more than these thresholds, they can still deduct 75% of Social Security benefit payments.
In Kansas, if your adjusted gross income is $75,000 or less, you don’t have to pay state taxes on your benefits, no matter your filing status.
Although Social Security is taxable in Missouri, many seniors will not have to, specifically those who have an adjusted gross income of less than $85,000 (single filers/heads of household) or $100,000 (joint filers), according to SmartAsset.
For many retirees in Montana, Social Security is taxable. However, taxpayers who make less than $25,000 (single filers) and $32,000 (joint filers) can deduct all of their Social Security retirement income, according to SmartAsset. However, starting in 2024, Social Security benefits will be taxed by Montana just as they are taxed at the federal level.
Currently, Social Security benefits are still taxable in Nebraska, though on a sliding scale based on adjusted gross income. People and beneficiaries with incomes below $59,100 (for a married couple) and $44,460 (for an individual) do not currently have to pay state tax on their benefits, according to AARP. However, thanks to recent legislation, the state will phase out the state income tax on benefits by 2025 gradually. It began with a reduction of 5% for 2022, 20% in 2022, 30% in 2023, 40% in 2024 and 50% in 2025.
- New Mexico.
In the state of New Mexico, as of 2023, tax on Social Security benefits has been phased out for individuals earning less than $100,000 a year and married people filing jointly who earn less than $150,000, according to AARP.
- Rhode Island.
You do not have to pay taxes on Social Security in Rhode Island if you’ve reached full retirement age, per the Social Security Administration guidelines, and have an adjusted gross income that falls below $86,350 (single filers/head of household) or $107,950 (joint filers), according to AARP.
Vermont lawmakers recently voted to increase the income threshold that would exempt retirees from paying taxes on their Social Security benefits, according to AARP. Single filers with an adjusted gross income of $50,000 or less can now receive full exemption from paying state taxes on their benefits. If you make between $50,000 and $60,000, you’re eligible for a partial exemption.
For joint filers, you can get the full exemption at incomes of $65,000 or less, and partial exemption for incomes between $65,000 and $75,000.
Until 2021, Utah was the only state that taxed Social Security benefits the same way that the federal government does. Under the federal government’s system, Social Security was taxed based on a formula involving a taxpayer’s filing status and the size of their “combined income,” which was a combination of adjusted gross income, nontaxable interest and half of Social Security benefits. However, the state recently capitulated and now uses its own income-based tax credit system to offset Social Security income for single filers earning less than $30,000 and joint filers drawing less than $50,000. Those who earn more than those thresholds can still get a partial exemption on their benefits — the tax credit is reduced by 25 cents for each dollar above the income thresholds mentioned above, according to AARP.
John Csiszar contributed to the reporting for this article.
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