States that tax Social Security benefits — including changes for 2024
If you’re looking for the best state to live in after you retire, taxes may not be the first thing that comes to mind. But whether or not your federally taxed Social Security benefits are taxed at the state level can affect your budget and quality of life.
As it stands, nine states have no state income tax — and of those that do, most don’t tax Social Security. But the tax policies of the states that do vary widely, offering exemptions and deductions to help offset what beneficiaries pay.
Here’s how to know whether you owe taxes on your Social Security in your own state, including up-to-date details on changing rules, regulations and thresholds.
States that tax Social Security benefits
Nine states require retirees to pay income tax on their Social Security benefits, with Kansas the most recent state to remove that tax burden from retirees, as of June 2024.
But who is exempt and how much of your Social Security income is taxed varies by state law. Note too that states only tax that portion of your Social Security income that’s considered taxable by the federal government.
Colorado
Colorado reduced its income tax rate to 4.25% in May 2024, down from 4.4% in 2023. But if you turn 55 during the tax year, you can write off up to $20,000 in Social Security benefits. As of 2022, retirees ages 65 and older in the Centennial State can write off all of their taxable Social Security benefits.
Connecticut
Connecticut residents can expect to pay an extra 3.0% to 6.99% in state income tax. But if you receive Social Security, you’ll include only 50% of your received benefits in your taxable income.
Kansas
Kansas state income tax rates are 3.10%, 5.25% and 5.70%, based on income level. For retirees, Kansas allowed anyone with an adjusted gross income of $75,000 or less to exempt their Social Security benefits from state taxes. Anyone making more than that had to pay taxes on the amount also taxed by the federal government.
But a bill passed in June 2024 now eliminates taxes on Social Security altogether — starting with the 2024 tax year.
Minnesota
Minnesota’s state income tax calculations are more complex than those of other states. The North Star State has four tax brackets, adding anywhere between 5.35% to 9.85% in taxes to your bill.
But you can deduct all of your Social Security benefits for state tax purposes if your adjusted gross income (AGI) falls below the following thresholds:
$105,380 for married taxpayers filing joint returns
$82,190 for single or head of household taxpayers
$52,960 for married taxpayers filing separately
The amount of your deduction decreases as you exceed those AGI levels — by 10% for every $4,000 of AGI for most taxpayers.
Montana
Not only did an attempted repeal of Montana’s state tax on Social Security benefits fail this year, but several of the state’s popular deductions were repealed as well. That leaves Montana’s seniors paying a 5.9% state tax on all income over $41,000, including income from Social Security.
The good news is that Montana residents over age 65 can take a new standard $5,500 deduction from their federal taxable income for the 2024 tax year.
New Mexico
New Mexico increased the income threshold for state tax on Social Security benefits in 2022.
For the 2024 tax year, your Social Security income isn’t taxed if your income falls below the following thresholds:
$75,000 for married couples filing separately
$100,000 for single or head of household taxpayers
$150,000 for married couples filing jointly
All retirees with lower incomes are exempt from owing taxes on their Social Security benefits.
Rhode Island
Rhode Island exempts Social Security benefits from its state tax for retirees who are at or above the age of full retirement according to the Social Security Administration — currently age 67 — and whose adjusted gross income falls below the following thresholds:
$126,250 for married couples filing jointly
$101,000 for single or head of household taxpayers
$101,025 for married couples filing separately
These thresholds are adjusted every year for inflation, and Rhode Island hasn’t yet published its 2024 requirements, so be sure to confirm income thresholds for the 2024 tax year before you file.
Utah
Utah taxes Social Security benefits at its flat state income tax rate of 4.55% in 2024. But seniors and retirees may qualify for one of two tax credits:
If you were born in or before 1952, you may qualify for a retirement credit of up to $450. You’ll need to complete the Retirement Credit worksheet to learn if you’re eligible.
If you don’t meet the age requirements for the retirement credit and received Social Security, disability or survivor benefits, you may be eligible for a tax deduction by completing the Social Security Credit worksheet.
Unfortunately, you can’t qualify for both credits.
Vermont
Seniors living in Vermont can expect to pay between 3.35% and 8.75% in state income tax, but whether your Social Security benefits are excluded depends on your filing status and adjusted gross income:
Married couples filing jointly can fully deduct Social Security benefits from their state taxes if their income doesn’t exceed $65,000. Income between $60,000 and $75,000 is eligible for a partial tax exemption, with no exemption for income of $70,000 and higher.
All other senior taxpayers can fully deduct Social Security benefits from their state taxes if their income doesn’t exceed $50,000. Income between $50,000 and $60,000 is eligible for a partial tax exemption, with no exemption for income of $60,000 and higher.
West Virginia
West Virginia will slowly eliminate state income tax on Social Security benefits over the next three years, thanks to a new law passed in March 2024.
Percentages are based on your total Social Security benefits received and included in your federal adjusted gross income:
2024 tax year — 35% of Social Security benefits allowed as deduction
2025 tax year — 65% of Social Security benefits allowed as deduction
2026 tax year — 100% of Social Security benefits allowed as deduction
Before this decision, only seniors making up to $50,000 a year — or $100,000 if married and filing jointly — could deduct Social Security benefits from West Virginia state taxes.
States that don’t tax Social Security
Most states don’t levy state income tax on Social Security benefits, and some of those don’t have state income tax at all.
9 states with no state income tax
These states don’t tax your income, though you could end up paying taxes on stocks and other investments, depending on the state:
Alaska
Florida
Nevada
New Hampshire
South Dakota
Tennessee
Texas
Washington
Wyoming
32 states with state income tax that do not tax Social Security benefits
While these states and Washington, D.C., tax your income, each allows seniors and retirees to exclude Social Security benefits from state or district taxes:
Alabama
Arizona
Arkansas
California
Delaware
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas (starting in 2024)
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Mississippi
Missouri
Nebraska
New Jersey
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
South Carolina
Virginia
Wisconsin
Washington, D.C.
Does the federal government tax Social Security benefits?
Yes. The federal government began taxing Social Security benefits with the 1984 tax year, but it wasn’t until 1993 that tax rates and income thresholds were set to what today’s seniors are expected to pay. Unlike state tax laws, which can shift and change with cost of living and inflation, the income thresholds and tax rates for federal taxation of Social Security haven’t changed in 30 years.
These taxes are determined based on your filing status, as well as your “combined” income — which is your adjusted gross income, any non-taxable interest you earned, plus 50% of your Social Security benefits. Knowing your combined income, you can check it against the income thresholds listed below to understand taxes you’ll owe to the federal government.
If married, filing jointly
85% of Social Security benefits taxed for incomes higher than $44,000
50% of benefits taxed for incomes of $32,000 to $44,000
Benefits exempt from taxes for incomes lower than $32,000
All other taxpayers
85% of Social Security benefits taxed for incomes higher than $34,000
50% of benefits taxed for incomes between $25,000 to $34,000
Benefits exempt from taxes for incomes lower than $25,000
5 tips to minimize your tax burden and lower your tax bill
The best way to make sure you’re paying only what you owe is to sit down with a trusted tax professional who has experience with pensions and retirement income. That way, you can ask questions about tax strategies specific to your benefits, savings and lifestyle and implement what makes sense.
When planning for retirement, consider these general tips throughout the year with your taxes in mind:
Keep your tax bracket as low as possible. Your retirement withdrawals are taxed as income, so the lower your tax bracket, the lower the tax rate on your withdrawals. And if you can keep your income below federal Social Security thresholds, you may be able to pay less in tax on that income as well.
Be strategic about retirement withdrawals. When you turn 73, you’re required to withdraw a minimum distribution from your retirement accounts, including 401(k)s. But you might consider taking smaller distributions in your 60s to distribute the tax burden over several years and keep your income in a smaller tax bracket. Compare the taxes you’d save against the loss of interest you could earn to see if this strategy might work for you.
Convert your investments when taxes are low. If you have a low-income year or a year when taxes are lower for your tax bracket, it may be a good idea to convert your pre-tax IRAs to Roth IRAs, which aren’t taxed on withdrawal. Taking the tax hit while you’re gainfully employed can help reduce the tax burden in your retirement years.
Diversify your portfolio with tax-free bonds. Consider investing in federal, state or municipal bonds, which are considered no-risk, tax-free investments. But be aware that you will have to include the income in your federal taxes once the bond matures.
Avoid paying penalties wherever possible. Talk with a tax professional to confirm you’re handling tax liabilities without penalty and to be sure you’re withdrawing the correct amount from your retirement accounts for your required minimum distribution (RMD). Failing to meet your RMD comes with a 25% penalty, in addition to the taxes you’ll pay on withdrawal.
Enlist the help of an expert. The best way to make sure you’re paying only what you owe is to sit down with a professional who has experience with pensions and retirement income. That way, you can ask questions about tax strategies specific to your benefits, savings and lifestyle and implement what makes sense. Get started with our guide to finding a trusted retirement advisor.
Dig deeper: Tax breaks after 50 you might not know about
FAQs: Social Security and your taxes
Learn more about your taxes, Social Security benefits and exemptions to lower your tax bill.
Are seniors exempt from capital gains tax?
No, there’s no longer a capital gains exemption specifically for seniors. Taxpayers over 55 were once allowed a one-time $125,000 in capital gains exemption for selling their home, known as the over-55 rule, but that rule was phased out in 1997.
There is a general capital gain exemption for the sale of a main home — as much as $250,000 for single filers and $500,000 for joint filers if you meet an ownership and use test — but there are no minimum age requirements currently for this exemption.
What does adjusted gross income mean?
Your adjusted gross income is a number that’s used by the IRS and state tax departments to determine your tax burden — or the amount of taxes you owe in a specific year.
Commonly referred to as your AGI, your adjusted gross income represents your total income — from employment or other wages to alimony, child support and retirement benefits — minus deductions you’re qualified to take, like those for eligible interest payments, health savings account contributions or self-employment taxes.
How much money can I make in retirement and still collect Social Security?
For the 2024 tax year, your annual earnings limit is $22,230. If you reach full retirement age in 2024, the most you can earn in the months before retirement is $59,520.
Enter your birthdate and salary into the SSA's earnings test calculator to see how your earnings before retirement might affect your Social Security benefits.
Where do retirees invest their money?
Retirees tend to invest their money in a mix of different retirement accounts, whether that’s 401(k)s, IRAs, taxable brokerage accounts and even safe, reliable deposit accounts, like high-yield savings accounts, CDs and money market accounts. There’s no one-size-fits-all method for where retirees invest their money, so what works for others might not always work for you. Read our guide to investing your money after retirement.
Sources
Income Taxes and Your Social Security Benefit, Social Security Administration. Accessed August 23, 2024.
About the writer
Heather Petty is a finance writer who specializes in consumer and business banking, personal and home lending, debt management and saving money. After falling victim to a disreputable mortgage broker when buying her first home, Heather set on a mission to help people avoid similar experiences when managing their own finances. Her expertise and analysis has been featured on MSN, Nasdaq, Credit.com and Finder, among other financial publications. When she's not breaking down the complexities of finance, she's a young adult mystery writer of an internationally acclaimed series — and counting.
Article edited by Kelly Suzan Waggoner