37 States That Don’t Tax Social Security Benefits – Community News
Social Security

37 States That Don’t Tax Social Security Benefits

Many people do their best to plan and save for retirement, but are taken by surprise with a nasty surprise: taxes. A number of major sources of income for seniors are subject to taxes during retirement, such as traditional withdrawals from IRA and 401(k) plans, as well as retirement payments.

Social Security is another source of income that may be taxable, but not always. At the federal level, benefits taxes apply to seniors on moderate incomes or higher. And often those federal taxes are hard to avoid.

Map of the USA

Image source: Getty Images.

But avoiding state-level Social Security taxes isn’t that hard. That’s because most of the 50 states don’t tax distributions, and if you move to the right state, you can keep more of that money for yourself.

States that do not tax social security

Some states have no income tax at all. As such, Social Security benefits cannot be touched. But there are plenty of states that levy income taxes but still leave Social Security alone.

If you retire in one of these 37 states, you don’t have to worry about your benefits being taxed at the state level:

  1. Alabama
  2. Alaska
  3. Arizona
  4. Arkansas
  5. California
  6. Delaware
  7. Florida
  8. Georgia
  9. Hawaii
  10. Idaho
  11. Illinois
  12. Indiana
  13. Iowa
  14. Kentucky
  15. Louisiana
  16. Maine
  17. Maryland
  18. Massachusetts
  19. Michigan
  20. Mississippi
  21. Nevada
  22. New Hampshire
  23. New Jersey
  24. New York
  25. North Carolina
  26. Ohio
  27. Oklahoma
  28. Oregon
  29. Pennsylvania
  30. south carolina
  31. south dakota
  32. Tennessee
  33. Texas
  34. Virginia
  35. Washington
  36. Wisconsin
  37. Wyoming

Should You Avoid States That Offer Tax Benefits?

It’s easy to see why seniors would rather avoid having their Social Security income taxed at the state level. But it’s also important to realize that some states that have tax breaks offer other benefits, such as a low cost of living and a temperate climate.

In addition, your goal may be to move closer to your family after you retire. And you shouldn’t necessarily be put off by the idea of ​​state-level Social Security taxes.

For starters, many of the states that have tax breaks also offer exemptions for low and middle earners. Second, there are other steps you can take to lower your overall tax burden in retirement.

For starters, you can put your retirement savings into a Roth IRA or 401(k). While your contributions to one of these accounts will not give you a tax benefit, as a senior you can enjoy withdrawals tax-free.

You can also invest in a way that limits your tax liability. Loading municipal bonds, for example, is a good way to secure an income stream from interest payments without having to pay federal taxes. And if you buy municipal bonds issued by your state of residence, those interest payments are also exempt from state and local taxes.

Therefore, while it’s good to know which states do and don’t tax Social Security, you don’t necessarily need to make drastic changes to your retirement plans. Even if you to do eventually lose some of your benefits in state taxes, there are steps you can take to compensate.