10 States That Tax Social Security Benefits [2024]

Though we’ll be working for just a few extra years, my spouse and I’ve began on the lookout for a retirement house in a brand new location. One thing close to the seashore or a lake could be good. Not too removed from household and buddies, too.

In fact, as a tax author, I’m additionally on the lookout for a state with low earnings tax charges, a modest gross sales tax, and affordable property taxes. However one other vital aim is to keep away from states that tax Social Safety advantages if in any respect attainable.

The federal authorities goes to tax as much as 85% of our Social Safety advantages after we retire, however my spouse and I don’t wish to pay state taxes on this retirement earnings, too. So, whereas we’re not essentially crossing states that tax Social Safety earnings fully off our checklist of attainable retirement areas, these states definitely have a strike in opposition to them.

In case you’re in the identical boat, try my checklist of states that tax Social Safety advantages. It consists of states that solely tax a part of your Social Safety funds or solely taxes sure residents. I’ll additionally present another state tax data that could be useful as you search for your personal retirement dream house.

(Gross sales tax charges are supplied by the Tax Basis. Median property tax charges are primarily based on 2022 information from the U.S. Census Bureau, which is the newest information out there.)

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Colorado Taxes on Social Safety Advantages

On the subject of taxes on Social Safety advantages, Colorado is an efficient place to retire … so long as you don’t retire early. That’s as a result of the Centennial State’s tax on Social Safety earnings solely applies should you’re 55 to 64 years previous.

If that’s the case, you may deduct as much as $20,000 of Social Safety earnings that’s taxed on the federal degree. Something above that quantity is topic to Colorado earnings taxes.

In case you’re 65 or older, there’s no Colorado tax in your advantages.

Different Colorado State Taxes

Private Earnings Tax Charges—Colorado has a flat state earnings tax charge of 4.4%.

Earnings Tax on IRA and 401(okay) Plan Withdrawals—In case you’re not less than 65 years previous, you may deduct as much as $24,000 of 401(okay) or IRA distributions which might be taxed on the federal degree. In case you’re between 55 and 64 years previous, you may deduct as much as $20,000.

Gross sales Taxes—Colorado’s statewide gross sales tax charge is a comparatively low 2.9%, however native authorities charges may be as excessive as 8.3%. Because of this, based on the Tax Basis, the typical mixed state and native gross sales tax charge in Colorado is 7.807%, which is the Sixteenth-highest within the U.S.

Property Taxes—From a statewide perspective, property tax payments are comparatively low in Colorado. The median property tax charge for the complete state is barely 0.46%, which is the fourth-lowest when in comparison with the median charges in all 50 states and the District of Columbia.

Property and Inheritance Taxes—In case you reside in Colorado, your heirs will likely be completely happy to know that there are not any state property or inheritance taxes.

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Connecticut Taxes on Social Safety Advantages

My spouse and I used to reside in Connecticut, so it makes me unhappy to place the state on this checklist. However I don’t assume we’ll be returning to the Nutmeg State in our golden years, partially as a result of we don’t wish to threat having to pay the state’s tax on Social Safety earnings. (Though, as outlined under, Connecticut is chopping earnings taxes on different kinds of retirement earnings beginning this 12 months.)

There’s some excellent news for Social Safety recipients: You received’t must pay the Connecticut tax in your advantages in case your federal adjusted gross earnings for the 12 months is under:

• $75,000 should you’re single or a married particular person submitting a separate tax return
• $100,000 should you’re married submitting collectively, a head-of-household filer, or a surviving partner

Nonetheless, in case your earnings is above the relevant threshold, the state will tax 25% of both your complete Social Safety earnings for the 12 months or your Social Safety advantages topic to tax on the federal degree, whichever is decrease.

Different Connecticut State Taxes

Private Earnings Tax Charges—Connecticut state earnings tax charges begin at 2% and go as much as 6.99%.

Earnings Tax on IRA and 401(okay) Plan Withdrawals—For 2024, distributions from a 401(okay) account are totally exempt in case your federal adjusted gross earnings is lower than:

• $75,000 for single filers, married individuals submitting a separate tax return, or head-of-household filers
• $100,000 for married {couples} submitting collectively

Folks with earnings under the $75,000/$100,000 threshold can even deduct 50% of any withdrawals from a conventional IRA in 2024.

A partial exemption (starting from 2.5% to 85%) for IRA and 401(okay) funds is accessible in case your earnings is between:

• $75,000 and $99,999 for single filers, married individuals submitting a separate tax return, or head-of-household filers
• $100,000 and $149,999 for married {couples} submitting collectively

Going ahead, the bottom deduction for IRA distributions jumps to 75% in 2025, after which to 100% in 2026 and thereafter.

Gross sales Taxes—Connecticut imposes a 6.35% gross sales tax. No native gross sales taxes are permitted, so the mixed state and native gross sales tax charge is 6.35%, which is the Nineteenth-lowest within the nation.

Property Taxes—Plan for an enormous property tax invoice should you transfer to Connecticut. The median property tax charge in Connecticut is 1.78%, which is the third-highest within the nation.

Property and Inheritance Taxes—Connecticut imposes a 12% property tax, however for 2024 it solely applies to estates value $13.61 million or extra.

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Kansas Taxes on Social Safety Advantages

Taxes on Social Safety advantages are quite simple in Kansas.

In case your federal adjusted gross earnings is bigger than $75,000, Social Safety advantages taxed on the federal degree are additionally taxed by Kansas.

In case your federal adjusted gross earnings is $75,000 or much less, there’s no Kansas tax in your earnings from Social Safety.

Different Kansas State Taxes

Private Earnings Tax Charges—The Kansas earnings tax charges vary from 3.1% to five.7%.

Earnings Tax on IRA and 401(okay) Plan Withdrawals—Below Kansas legislation, calculation of the state’s private earnings tax begins with federal adjusted gross earnings. Since there are not any state deductions from that quantity for IRA and 401(okay) distributions, withdrawals from these retirement accounts are taxed by Kansas to the identical extent they’re taxed by the federal authorities. So, for instance, in case your federal adjusted gross earnings consists of $1,000 of IRA or 401(okay) distributions, then that very same $1,000 is taxed by Kansas.

Gross sales Taxes—Gross sales taxes are on the excessive finish in Kansas. There’s a 6.5% statewide gross sales tax, plus native governments can tack on as much as 4.25% extra. That pushes the typical mixed state and native gross sales tax charge to eight.654%, which is the ninth-highest within the nation.

Property Taxes—Property taxes lean excessive in Kansas, too. The state’s median property tax charge is 1.25%, which is the nation’s Thirteenth-highest charge.

Property and Inheritance Taxes—No want to fret about an property or inheritance tax in Kansas. The state doesn’t impose a lot of these “demise taxes.”

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Minnesota Taxes on Social Safety Advantages

The taxation of Social Safety funds is a little more difficult within the North Star State. That’s as a result of there are two separate methods to calculate the Minnesota tax in your advantages. Nonetheless, for a lot of Minnesota retirees, there’s no state earnings tax on their Social Safety earnings.

When calculating your Minnesota taxable earnings, embody the quantity (if any) of Social Safety advantages taxed on the federal degree. From that time, you may declare a tax deduction for Social Safety earnings below considered one of two strategies—choose the one which saves you essentially the most cash.

Below the “simplified methodology,” you may deduct 100% of your Social Safety advantages in your Minnesota earnings tax return in case your federal adjusted gross earnings is under a certain quantity. Nonetheless, in case your federal adjusted gross earnings is above the relevant threshold, your deduction is phased out by 10% for every $4,000 of earnings over the edge quantity (10% for every $2,000 over the edge for married taxpayers submitting separate returns).

The federal adjusted gross earnings thresholds and phaseout ranges for the 2024 tax 12 months are proven within the following desk.

Below the “different methodology,” you may deduct Social Safety advantages in your Minnesota tax return based on the next desk.

For this deduction, “provisional earnings” is the same as modified adjusted gross earnings, as used for functions of calculating federal taxes on Social Safety advantages, plus one-half of the Social Safety advantages taxed on the federal degree for the 12 months.

Different Minnesota State Taxes

Private Earnings Tax Charges—The bottom Minnesota earnings tax charge is 5.35%. The best charge is a relatively excessive 9.85%.

Earnings Tax on IRA and 401(okay) Plan Withdrawals—There are not any particular tax breaks below Minnesota legislation for withdrawals from an IRA or 401(okay) account. Because of this, they’re taxed by Minnesota to the identical extent they’re taxed below federal legislation.

WealthUp Tip: Whereas there’s no particular tax break for IRA or 401(okay) distributions, seniors age 65 or older can declare a particular deduction of as much as $9,600 ($12,000 for joint filers). Earnings limits apply.

Gross sales Taxes—Minnesota gross sales taxes are on the excessive aspect. There’s a 6.875% state tax, plus native taxes of as much as 2.15%. The common mixed state and native gross sales tax charge for Minnesota is 8.038, which is the Fifteenth-highest within the U.S.

Property Taxes—At 0.98%, Minnesota’s median property tax charge is just a little on the excessive finish. That is available in because the Nineteenth-highest quantity amongst all 50 states and the District of Columbia.

Property and Inheritance Taxes—Minnesota taxes estates valued at $3 million or extra. The property tax charges vary from 13% to 16%.

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Montana Taxes on Social Safety Advantages

Whereas a home with a view close to Flathead Lake sounds good for a retirement vacation spot, you may need to pay the Montana tax on Social Safety advantages should you moved out to Massive Sky nation.

Earlier than 2024, the calculation of Montana taxes on Social Safety earnings was primarily based in your Montana adjusted gross earnings, not your federal adjusted gross earnings. Because of this, the Montana tax didn’t at all times match up completely with the federal tax.

Nonetheless, beginning this 12 months, Montana taxpayers received’t must calculate Montana adjusted gross earnings anymore. As a substitute, the calculation of Montana earnings tax will likely be primarily based in your federal adjusted gross earnings. Since there are not any changes to that quantity for Social Safety advantages, the identical quantity of Social Safety earnings topic to federal tax can be topic to Montana tax for the 2024 tax 12 months.

Different Montana State Taxes

Private Earnings Tax Charges—There are solely two Montana tax charges: 4.7% and 5.9%.

Earnings Tax on IRA and 401(okay) Plan Withdrawals—Starting with the 2024 tax 12 months, the previous deduction for pension and different retirement earnings (together with IRA and 401(okay) distributions) is repealed and changed with a brand new $5,500 deduction for every Montana taxpayer who’s not less than 65 years previous.

Gross sales Taxes—There’s no state-level gross sales tax in Montana. Plus, native governments typically can’t impose their very own gross sales tax, both. Nonetheless, just a few vacationer areas (e.g., Whitefish, Massive Sky, and West Yellowstone) can impose a “resort tax” of as much as 3%.

Property Taxes—Property tax payments are typically on the low aspect in Montana, too. The state’s median property tax charge is 0.68%, which is the nation’s Nineteenth-lowest charge.

Property and Inheritance Taxes—Montana doesn’t acquire property or inheritance taxes.

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New Mexico Taxes on Social Safety Advantages

In case you’re a retiree in New Mexico, you received’t owe tax in your Social Safety advantages in case your adjusted gross earnings is:

• $150,000 or much less in case your submitting standing is married submitting collectively, head of family, or certified widow(er)
• $100,000 or much less in case your submitting standing is single
• $75,000 or much less in case your submitting standing is married submitting individually

Nonetheless, should you exceed the relevant earnings threshold, your Social Safety earnings is topic to New Mexico taxes to the identical extent it’s topic to federal earnings taxes.

Different New Mexico State Taxes

Private Earnings Tax Charges—State earnings tax charges in New Mexico begin at 1.7% and rise to five.9%.

Earnings Tax on IRA and 401(okay) Plan Withdrawals—In case you’re not less than 65 years previous, you may deduct as much as $8,000 of earnings—together with IRA and 401(okay) withdrawals—in your New Mexico tax return.

WealthUp Tip: In case you’re not less than 100 years previous, all of your earnings is exempt from New Mexico taxes.

Gross sales Taxes—The state gross sales tax charge in New Mexico is 4.875%, however some native governments tack on an extra 4.06%. Based on the Tax Basis, this leads to a median mixed state and native gross sales tax charge of seven.617%, which is the Seventeenth-highest charge within the nation.

Property Taxes—The median property tax charge in New Mexico is barely 0.67%, which is the Seventeenth-lowest within the nation.

Property and Inheritance Taxes—Property planning is less complicated in New Mexico, because the state has no property or inheritance tax.

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Rhode Island Taxes on Social Safety Advantages

You received’t owe Rhode Island taxes in your Social Safety advantages in case your federal adjusted gross earnings is under a certain quantity. The Rhode Island Division of Income hasn’t launched the 2024 earnings thresholds but, however the quantities for the 2023 tax 12 months had been:

• $126,250 for married {couples} submitting collectively or qualifying widow(er)s
• $101,025 for married taxpayers submitting individually
• $101,000 for single and head-of-household filers

Nonetheless, should you exceed the relevant earnings threshold, the Ocean State will tax your Social Safety funds to the identical extent they’re taxed by the federal authorities.

Different Rhode Island State Taxes

Private Earnings Tax Charges—The bottom tax charge in Rhode Island is 3.75%, whereas the very best charge is 5.99%.

Earnings Tax on IRA and 401(okay) Plan Withdrawals—In case you’ve reached your full retirement age (as outlined by the Social Safety Administration) and don’t exceed sure earnings thresholds, you may deduct as much as $20,000 of 401(okay) distributions and different widespread types of retirement earnings (however not IRA withdrawals) out of your Rhode Island taxable earnings.

The 2024 earnings thresholds haven’t been launched but, however the 2023 thresholds had been the identical because the 2023 quantities for the Social Safety earnings deduction (i.e., $126,250, $101,025, or $101,000).

Gross sales Taxes—The Rhode Island gross sales tax may be very common. There’s a 7% state gross sales tax, however there’s no native gross sales tax within the state. With a mixed state and native charge of seven%, Rhode Island claims the Twenty fifth-highest charge within the nation (like I stated, very common).

Property Taxes—Like different states within the northeast, Rhode Island has higher-than-average property tax charges. The state’s median property tax charge is 1.23%, which is 14th-highest within the U.S.

Property and Inheritance Taxes—Rhode Island imposes an property tax. The charges run from 0.8% to 16%, however for 2024 the tax solely applies to estates value $1,774,583 or extra.

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Utah Taxes on Social Safety Advantages

Utah has a novel method of dealing with its tax on Social Safety earnings. As a substitute of a tax deduction or exemption, the Beehive State makes use of a tax credit score to cut back or remove the state tax on Social Safety recipients. However there are earnings limits limiting who can declare the total tax credit score, so some higher-income residents find yourself paying state earnings tax on not less than a few of their Social Safety funds.

The total tax credit score is the same as the quantity of Social Safety advantages taxed on the federal degree multiplied by the Utah earnings tax charge (4.65%). Nonetheless, the credit score is diminished in case your Utah modified adjusted gross earnings is above the next relevant quantity:

• $37,500 for a married particular person submitting a separate tax return
• $45,000 for single filers
• $75,000 for married {couples} submitting collectively, head-of-household filers, and surviving spouses

Your tax credit score is diminished by $0.025 for each greenback over the relevant earnings threshold.

Different Utah State Taxes

Private Earnings Tax Charges—Utah has a flat state earnings tax charge of 4.65%.

Earnings Tax on IRA and 401(okay) Plan Withdrawals—There’s a really slim tax deduction for distributions from a conventional 401(okay) plan, but it surely solely applies if, on the time the cash was put into the account, the withdrawn funds had been taxed by one other state, the District of Columbia, or a U.S. possession. In any other case, there are not any different Utah tax breaks for IRA or 401(okay) distributions.

WealthUp Tip: Folks born earlier than 1953 qualify for a Utah tax credit score of as much as $450 in the event that they don’t declare both the credit score for Social Safety advantages or for navy retirement earnings.

Gross sales Taxes—Gross sales taxes are just a little on the excessive aspect in Utah. There’s a 4.85% state gross sales tax, 1.25% in obligatory native taxes, and extra native taxes of as much as 4.2%. Based on the Tax Basis, this leads to a median mixed state and native gross sales tax charge of seven.249%, which is the nation’s Twentieth-highest charge.

Property Taxes—Property taxes are on the low aspect, although. Utah’s median property tax charge is barely 0.48%, which is Eighth-lowest charge within the nation.

Property and Inheritance Taxes—One other plus is that there are not any property or inheritance taxes in Utah.

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Vermont Taxes on Social Safety Advantages

In Vermont, the state received’t tax Social Safety advantages in case your federal adjusted gross earnings is:

• $65,000 or much less for married {couples} submitting a joint tax return
• $50,000 or much less for everybody else

In case your earnings is above the relevant quantity, you would possibly qualify for a partial tax exemption in case your federal adjusted gross earnings is between:

• $65,001 and $74,999 for joint filers
• $50,001 and $59,999 for different individuals

In case your earnings exceeds the earnings thresholds for a partial tax break, then Vermont taxes your Social Safety advantages to the identical extent they’re taxed below federal legislation.

Different Vermont State Taxes

Private Earnings Tax Charges—Vermont’s state earnings tax charges begin at 3.35% and run as excessive as 8.75%.

Earnings Tax on IRA and 401(okay) Plan Withdrawals—Since there are not any particular tax breaks for IRA or 401(okay) plan distributions, withdrawals from these kinds of retirement accounts are taxed by Vermont to the identical extent they’re taxed below the federal earnings tax legislation.

Gross sales Taxes—Vermont gross sales taxes are just a little under common. The state imposes a 6% tax, whereas native governments can add an extra 1% tax. All in all, the typical mixed state and native gross sales tax charge in Vermont is 6.359%. That’s the Twentieth-lowest charge within the nation.

Property Taxes—Vermont property taxes, then again, are effectively above the nationwide common. At 1.57%, the state has the fifth-highest median property tax charge within the nation.

Property and Inheritance Taxes—Vermont additionally taxes estates value $5 million or extra at a 16% charge.

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West Virginia Taxes on Social Safety Advantages

West Virginia received’t tax your Social Safety advantages in case your federal adjusted gross earnings is:

• $100,000 or much less for married {couples} submitting collectively
• $50,000 or much less for all different taxpayers

Nonetheless, in case your earnings is bigger than the relevant greenback quantity, West Virginia will levy a state earnings tax in your Social Safety funds to the identical extent you will need to pay taxes on that earnings to the federal authorities.

Different West Virginia State Taxes

Private Earnings Tax Charges—West Virginia state earnings tax charges vary from 2.36% to five.12%. Nonetheless, starting in 2025, the charges may be lowered every year if sure income assortment thresholds are exceeded, however not more than 10% per 12 months.

Earnings Tax on IRA and 401(okay) Plan Withdrawals—West Virginia taxes IRA and 401(okay) distributions to the identical extent they’re taxed on the federal degree.

WealthUp Tip: In case you’re not less than 65 years previous, you may robotically deduct as much as $8,000 out of your West Virginia taxable earnings.

Gross sales Taxes—West Virginia imposes a 6% state-level gross sales tax, whereas native governments can tack on an extra 1%. Based on the Tax Basis, the typical mixed state and native gross sales tax charge in West Virginia is 6.567%, which is the Twenty first-lowest within the nation.

Property Taxes—The median property tax charge in West Virginia is barely 0.53%, which is the Eleventh-lowest within the U.S.

Property and Inheritance Taxes—Residents of West Virginia don’t have to fret a few state-level property or inheritance tax.

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