As of the start of September, nearly 54 million Americans received Social Security retirement benefits. For many, Social Security is their main retirement income source, making it one of the country’s most important and effective social programs.
There are a lot of valid critiques of Social Security, but it should be easy to appreciate the financial lifeline it provides for millions.
Unfortunately, like other forms of income, Social Security benefits are subject to tax rules. However, there’s good and bad news for retirees. Let’s take a look at both.
Most retirees can avoid Social Security state taxes
The good news about Social Security taxes is that most states do not tax Social Security benefits. Here are the 41 states (and Washington, D.C.) that currently do not:
- 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
States’ Social Security tax rules are fluid, so if you’re living in one of the nine states that currently tax benefits, be sure to keep up with your state’s rules each year because they can change. In 2024 alone, three states (Missouri, Nebraska, and Kansas) did away with their Social Security tax.
Unfortunately, federal tax rules still apply
Now, it’s time for me to be the bearer of bad news: Regardless of your state’s specific tax rules, federal tax rules still apply to everyone. The IRS uses your “combined income” to calculate your tax bill. It includes the following: