Take-home pay. Everyone who’s worked for a living knows that this is the amount that matters the most. And it still matters even when you’re retired.
Retirees who receive Social Security benefits can have their take-home pay reduced by income taxes just like when they were working full-time. However, you can get at least a partial reprieve depending on where you live.
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States that don’t tax Social Security benefits
Currently, Social Security benefits aren’t taxable in 38 states. One more will be added to the list in 2023, though. In the past, Colorado allowed $24,000 of Social Security income to be deducted from state taxes. Starting next year, no Social Security benefits will be taxed in the Rocky Mountain state.
Here’s the full list of the 39 states where Social Security benefits won’t be taxed in the new year:
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Delaware
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Mississippi
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
There’s also one other place in the U.S. you can live where your Social Security benefits won’t be taxed. It’s not a state at this point, but the District of Columbia exempts Social Security benefits from any income taxes.
States that do tax Social Security benefits
So which states do tax Social Security benefits? There are currently 12 states where you could lose some of your benefits to taxes. As mentioned previously, though, Colorado won’t be on the list beginning in 2023. Here are the 11 remaining states where you could have to pay taxes on your Social Security benefits:
Connecticut
Kansas
Minnesota
Missouri
Montana
Nebraska
New Mexico
Rhode Island
Utah
Vermont
West Virginia
Even in these states, though, it’s possible that you won’t have to pay state taxes on all of your Social Security benefits. Most of them only tax benefits above a specified income level.
States that don’t tax any retirement benefits
Some states not only don’t tax Social Security benefits, they don’t tax any retirement benefits. Nine states don’t have an income tax:
Alaska
Florida
Nevada
New Hampshire
South Dakota
Tennessee
Texas
Washington
Wyoming
In addition, three states have income taxes but exempt retirement income — including Social Security as well as distributions from IRAs, 401(k) plans, and pension plans:
Illinois
Mississippi
Pennsylvania
Don’t forget other taxes, though
Regardless of where you live, your Social Security benefits could be subject to federal taxes. If you file an individual federal tax return and your combined income tops $25,000, you’ll have to pay federal taxes on up to 85% of your Social Security benefits. The same is true if you file a joint return and your combined income is more than $32,000. Combined income, by the way, includes half of your Social Security benefits, your adjusted gross income, and any tax-exempt interest income.
It’s also important to remember that you could have to fork over money to states even if they don’t tax your Social Security benefits. For example, some states have high property taxes. Still, where you live definitely matters in how much take-home pay you will receive with Social Security.
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