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

37 States That Don’t Tax Social Security Benefits

With the cost of living ever increasing, you probably aren’t eager to give the government more of your money than it needs to. That’s especially true if you’re retired and living on Social Security benefits and personal savings.

While income taxes are a part of everyone’s life, not all seniors need to worry about paying taxes on their Social Security benefits. Here’s a look at which states expect their seniors to pay and how the federal government fits into it all.

Smiling seniors sitting by the pool.

Image source: Getty Images.

Could you be dealing with taxes on your Social Security benefits?

The following 37 states do not tax their residents’ Social Security benefits:

  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

If your state isn’t on this list, there’s a chance you’ll face taxes on your benefits, but that’s not a guarantee. Each state has its own rules that determine which seniors owe taxes, and they are usually based on seniors’ adjusted gross income (AGI) or the amount they receive in benefits throughout the year.

In Kansas, for example, only those with an AGI of $75,000 or more owe taxes on their Social Security benefits. Seniors who manage to keep their AGI below this amount are not required to relinquish any of their benefits to the state.

High-income seniors concerned about benefits may consider moving to one of the 37 tax-exempt states listed above to maintain more of their Social Security checks. Doing this may help you avoid distribution tax, but that doesn’t mean you’re completely off the hook.

Does the Federal Government Tax Social Security Benefits?

The federal government also taxes some seniors’ Social Security benefits. It determines how much you owe by looking at your provisional income. That’s your AGI plus any non-taxable interest and half of your annual Social Security benefits.

Individuals with a provisional income of more than $25,000 and married couples with a provisional income of more than $32,000 may be subject to tax on up to 50% of their distributions. Individuals with provisional incomes over $34,000 and married couples with provisional incomes over $44,000 may be subject to tax on up to 85% of their distributions.

But that’s the worst-case scenario. Some people pay taxes on a smaller amount than this, and some manage to avoid distribution taxes entirely.

However, many seniors do pay some Social Security benefits. If you don’t think you can avoid taxes altogether, it’s best to estimate in your retirement plan how much you might owe in taxes and budget for this.

If you are not yet retired, keep an eye out for any rule changes related to Social Security or benefit taxation and update your retirement plan accordingly. Keeping a close eye on these changes will ensure that you aren’t caught off guard by your tax bills when you retire.