Social Security is a vital financial safety net for over 66 million people across the United States. In April, the average Social Security check among 52.6 million retired workers was $1,999.97, an annualized sum of about $24,000 for the average beneficiary.
Just how important is Social Security to Americans? The typical U.S. household only has $185,000 to $200,000 in retirement savings by the time they approach 62, the earliest you can begin claiming Social Security.
Based on the popular 4% rule, that typical household would only be able to withdraw about $8,000 annually. In other words, many retirees depend on Social Security as a major source of income.
That means retirees must stretch their Social Security as much as possible. It would help not to have to pay state taxes on your benefits. Fortunately, 41 states don’t tax Social Security. Knowing where your state stands on this issue can help you make the best retirement decisions.
Image source: Getty Images.
Here are the 41 states that won’t tax your Social Security benefits:
- Alabama
- Alaska
- Arizona
- Arkansas
- California
- Delaware
- Florida
- Georgia
- Hawaii
- Idaho
- Illinois
- Indiana
- Iowa
- Kansas
- Kentucky
- Louisiana
- Maine
- Maryland
- Massachusetts
- Michigan
- Mississippi
- Missouri
- Nebraska
- Nevada
- New Hampshire
- New Jersey
- New York
- North Carolina
- North Dakota
- Ohio
- Oklahoma
- Oregon
- Pennsylvania
- South Carolina
- South Dakota
- Tennessee
- Texas
- Virginia
- Washington
- Wisconsin
- Wyoming
Note that Washington, D.C. also doesn’t tax Social Security benefits.
Now, some states don’t tax income of any kind, while others may tax income from other sources, such as a 401(k). It’s essential to get a sense of where your income will come from and how your state’s tax code applies to you.
The federal government isn’t quite as forgiving — how to determine what you may owe
State taxes are just one part of the equation. The federal government will have its hand out, and that’s regardless of the state you reside in
Once you begin collecting Social Security, the government will look at your combined income, calculated as the sum of your adjusted gross income (AGI), any nontaxable interest, and half of the Social Security benefits from a given year.
Based on that combined income amount, a portion of your Social Security benefits could be subject to federal taxes:
| Status | Combined Income | Taxable Portion of Benefits |
|---|---|---|
| Single Filer | Under $25,000 | 0% |
| Single Filer | $25,000 to $34,000 | 50% |
| Single Filer | Over $34,000 | 85% |
| Status | Combined Income | Taxable Portion of Benefits |
|---|---|---|
| Joint Filer | Under $32,000 | 0% |
| Joint Filer | $32,000 to $44,000 | 50% |
| Joint Filer | Over $44,000 | 85% |
Source: The Internal Revenue Service (IRS).
Will President Trump’s “The One, Big, Beautiful Bill” end federal taxes on benefits?
There is a lot of attention on President Trump’s The One, Big, Beautiful Bill Act, which is an effort to codify and build on key components of the Tax Cuts and Jobs Act from Trump’s first term.
President Trump promised to eliminate federal taxes on Social Security on the campaign trail, but the bill, as it currently stands, does not do that. Instead, it will temporarily increase the standard deduction by up to $4,000 for U.S. seniors (aged 65 and older) from 2025 through 2028.
This provision isn’t exclusive to Social Security beneficiaries, but since many beneficiaries have low income, it could benefit many people receiving benefits. The increase begins to phase out at an adjusted AGI of $75,000 for single filers and $150,000 for joint filers, so this benefit will not be available to high-earning seniors.
While this means President Trump is technically walking back one of his key campaign promises, it could ultimately help protect Social Security’s long-term financial stability.
And of course, nine states do tax Social Security benefits:
- Colorado
- Connecticut
- Minnesota
- Montana
- New Mexico
- Rhode Island
- Utah
- Vermont
- West Virginia
Please note that some of these states have income thresholds or other rules that lighten the tax burden for many retirees, so simply being on this list isn’t necessarily an indictment of any given state. West Virginia will join the majority when it phases out its tax on Social Security benefits by next year.
The reality is that many factors will impact your finances in retirement, including local and state taxes and services, real estate prices, and more. Don’t hesitate to consult a tax professional if you’re unsure about the tax laws in your state.
