Learn Which States Tax Social Security Benefits

How Social Security Taxation Works at the Federal Level

Social Security benefits are treated as income by the federal government, but not all of it counts toward your taxable income. The federal government uses a formula to determine how much of your Social Security benefits may be subject to income tax. This system has been in place since 1983, when Congress made changes to the Social Security program.

The key to understanding federal taxation of Social Security is the concept of "combined income." Combined income includes your adjusted gross income (AGI), non-taxable interest, and one half of your Social Security benefits. The IRS uses two threshold amounts called "base amounts" to determine the taxable portion.

For single filers in 2024, the base amounts are $25,000 and $34,000. For married couples filing jointly, the thresholds are $32,000 and $44,000. Married people filing separately face much stricter rules, with a base amount of $0. If your combined income falls below the first threshold, you generally owe no federal income tax on your Social Security benefits. If it exceeds the first threshold, you may have to pay tax on up to 50 percent of your benefits. If your combined income exceeds the second threshold, you may have to pay tax on up to 85 percent of your benefits.

The actual calculation involves a specific formula that can seem complicated, but the IRS provides worksheets to help you figure it out. The important point is that Social Security taxation depends on your other sources of income, not just the benefits themselves. Someone living solely on Social Security will not pay federal taxes on those benefits, but someone with substantial investment income, pension payments, or continued wages might face significant taxation.

Practical Takeaway: Review your total income sources each year, including pensions, investments, and employment income. Use IRS Publication 915 or online calculators to estimate your potential tax liability on Social Security benefits before filing your annual return.

State-by-State Breakdown of Social Security Taxation

Not all states treat Social Security benefits the same way. Currently, 13 states have income taxes that apply to Social Security benefits under certain circumstances. Understanding which state you live in and how that state taxes Social Security is important for retirement planning.

Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, and Vermont all tax Social Security benefits to some degree. Additionally, Iowa taxes a portion of Social Security benefits, and Illinois exempts them entirely. However, even within these states, the rules vary significantly, and many offer special provisions for retirees.

Colorado, for example, taxes Social Security benefits the same way the federal government does—using combined income thresholds. Residents whose income exceeds certain levels pay tax on a portion of benefits, while lower-income retirees pay nothing. Connecticut applies a tax only to Social Security recipients whose income exceeds $75,000 for married couples filing jointly or $50,000 for single filers.

Kansas offers a significant exemption: Social Security benefits are fully excluded from state taxable income if you are 70 years old or older. Younger Kansas residents may have benefits taxed depending on their income level. Minnesota also provides relief for older residents, excluding all Social Security benefits from state taxation if you are 65 or older and your income is below certain thresholds.

Missouri provides an exemption for Social Security benefits entirely for residents who are 59 years old or older, making it one of the most favorable states for retirees. New Mexico taxes only 50 percent of the Social Security benefits that are taxable at the federal level, offering partial relief compared to full federal taxation.

Practical Takeaway: If you live in one of the 13 states that tax Social Security, contact your state tax authority or review your state's tax guide to understand the specific income thresholds and exemptions that apply to your situation. Your tax rate and total liability may differ significantly from the federal calculation.

States That Fully Exempt Social Security Benefits

The majority of American states—37 in total—do not tax Social Security benefits at all. This means that if you live in one of these states, any Social Security income you receive is not subject to state income tax, regardless of how much other income you have. These states offer a tax advantage to retirees that can meaningfully increase take-home income.

The list of states with no Social Security taxation is substantial and includes many large population centers. States that fully exempt Social Security benefits include Alabama, Alaska, Arizona, Arkansas, California, Delaware, Florida, Georgia, Hawaii, Idaho, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Nevada, New Hampshire, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Virginia, Washington, West Virginia, Wisconsin, Wyoming, and the District of Columbia.

It is worth noting that while these states do not tax Social Security, some of them do have other forms of income tax or may tax other types of retirement income differently. For example, some states that exempt Social Security may still tax pension income or investment earnings. Pennsylvania and South Dakota do not have income taxes on Social Security or pensions, but they may tax other forms of investment income. Texas and Florida have no income tax at all, making them especially attractive to retirees.

If you are considering relocating in retirement, comparing state tax treatment of Social Security across states can be an important factor. A retiree moving from a state that taxes Social Security to one that does not could save thousands of dollars annually, depending on benefit amounts and other income sources. However, other factors like property taxes, sales taxes, cost of living, and access to healthcare should also be considered in any relocation decision.

Practical Takeaway: If you live in one of the 37 states that do not tax Social Security benefits, you can disregard Social Security in your state tax calculations entirely. If you are planning to move in retirement, cross-reference state Social Security taxation policies with other tax considerations in your potential new state.

Special Circumstances and Additional Income Considerations

The taxation of Social Security benefits becomes more complex when you have multiple sources of income. Understanding how different types of income interact with Social Security taxation rules is important for accurate tax planning.

Interest income and dividend income count toward your combined income, which determines how much Social Security tax you owe. Someone who receives $30,000 in Social Security benefits and $15,000 in dividend income faces taxation on benefits because their combined income totals $45,000 (including half of Social Security benefits). If that same person had no dividend income, they would owe no federal tax on Social Security.

Pension income and retirement account withdrawals also count toward combined income. If you take distributions from a traditional IRA or 401(k), those distributions add to your combined income and may trigger taxation on Social Security benefits. Conversely, withdrawals from a Roth IRA do not count toward combined income for Social Security taxation purposes, making Roth conversions a potential strategy for managing tax liability.

Continued employment income while receiving Social Security affects taxation as well. If you work while claiming Social Security before your full retirement age, your earned wages increase your combined income, potentially triggering tax on benefits. Someone working part-time and receiving Social Security may end up paying tax on benefits because of the combined income calculation.

State-level considerations add another layer. In states that tax Social Security, special rules may apply for military pensions, government pensions, or income from other sources. Some states offer deductions or exemptions for certain types of income that do not apply in other states. For example, some states exempt military retirement income from state taxation, which affects the combined income calculation used for Social Security taxation.

Married couples filing jointly face different rules than single filers. The combined income thresholds for married couples are higher, but both spouses' incomes count toward the calculation. If one spouse has substantial non-Social Security income and the other relies primarily on Social Security, the couple's overall tax liability may be higher than if they filed separately—though filing separately usually results in higher taxes due to the $0 base amount.

Practical Takeaway: Create a comprehensive list of all income sources: Social Security, wages, self-employment income, interest, dividends, pensions, IRA withdrawals, rental income, and capital gains. Input these into a tax worksheet or work with a tax professional to understand how they interact to affect your total Social Security taxation.

Planning Strategies to Manage Social Security Taxation