Are you looking to retire in a more tax-friendly state? As of 2025, 41 states will not tax your Social Security benefits, potentially saving you thousands.
Understanding the 41 States That Don’t Tax Social Security Benefits
Retirement is meant to be a time of relaxation and enjoyment, but taxes can often cast a shadow over those plans. While many people anticipate enjoying their golden years, the burden of paying taxes on their hard-earned benefits can still loom. Fortunately, the good news for retirees is the growing number of states that offer significant tax relief. As of 2025, 41 states that don’t tax Social Security benefits will be available for retirees looking to maximize their income.
So which states should retirees consider for their next chapter? Let's take a closer look at the landscape of state taxes concerning Social Security.
Nine States That Tax Social Security Benefits
Before diving into the states that allow retirees to keep their benefits intact, it's important to discuss those that do tax Social Security. As it stands, nine states impose state income taxes on these benefits:
- Colorado
- Connecticut
- Minnesota
- Montana
- New Mexico
- Rhode Island
- Utah
- Vermont
- West Virginia
However, tax exemptions may apply depending on your income level. For instance, in Connecticut, single filers or those married filing separately may not pay state taxes on Social Security benefits if their adjusted gross income (AGI) is below $75,000. Moreover, other states like Minnesota and Vermont have similar thresholds tailored to the specific economic scenarios facing their retired citizens.
States Transitioning to More Tax-Friendly Environments
Amid these transitions, West Virginia is noteworthy as it's moving toward eliminating its Social Security tax by 2026. A resident’s ability to deduct 65% of Social Security benefits will increase to 100% next year, making it a potentially appealing option for upcoming retirees.
A Glimpse at the 41 States That Don’t Tax Social Security
Now let's explore the full list of the 41 states that don’t tax Social Security benefits, which broadens the avenues for retirement planning. These states range from coastal paradises to mountainous retreats, ensuring diverse lifestyle choices for retirees:
- 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
In addition to these, nine states do not tax any income, thus presenting even more appealing options for retirees. These nine states include:
- Alaska
- Florida
- Nevada
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
Among these, Mississippi is on the verge of phasing out its state income tax by 2040, offering an attractive destination for retirees focused on financial wellness. Specific revenue and spending thresholds need to be met, but the potential evolution of this state taxation could enhance its attractiveness further.
Navigating Federal Taxes on Social Security Benefits
Despite the favorable state tax situation, do remember that federal taxes may still apply to your Social Security benefits, depending on your income. The combined income threshold determines the tax implications on your benefits. For example, if your combined annual income exceeds $44,000 while filing jointly, up to 85% of your Social Security benefits may be taxable.
A simple calculation to follow is: add half of your Social Security benefits to all other income sources, including wages, pensions, and investment returns, to determine your tax obligation.
The Future of Federal Social Security Taxation
There have been discussions surrounding the potential for federal taxes on Social Security benefits to be eliminated. Some politicians, including former President Trump, have advocated for such changes. However, one must consider that such elimination could hasten the depletion of the Social Security trust funds, ultimately impacting future retirees.
Maximizing Retirement Income through Smart Planning
Planning ahead for retirement not only involves finding the right destination but also strategically utilizing available resources. Discovering secret methods to maximize existing benefits can provide retirees with additional security. For instance, some lesser-known strategies may help boost income by thousands each year. Programs like Stock Advisor offer insight into how retirees can best navigate these waters.
Choosing the right state for retirement isn't merely about the weather; it also hinges on the financial implications tied to state taxes on Social Security benefits. By exploring these 41 states that don’t tax Social Security benefits, retirees can potentially enhance their financial situation while enjoying the life they've worked hard to create.