What States Tax Social Security Benefits

By | March 9, 2014

When a taxpayer begins to collect social security benefits, it might make sense to examine which states tax social security benefits. There could be tax savings by planning a retirement in a state that does not tax social security benefits or income.


States with no Income Taxes

People who collect Social Security Retirement Benefits often want to move to a state where there is no state income tax. there are ten such states, they are: Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas and Wyoming. These states will not tax social security income because there is no state income tax.


What states do not tax social security benefits?

However, most states with an income tax allow retirees to exclude some or all of their income from Social Security, pensions, or both from taxable income. This type of tax benefit could also make the state desirable for retirement. These states include: Alabama, Arizona, Arkansas, California, Delaware, Georgia, Hawaii, Idaho, Illinois, Indiana, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Virginia and Wisconsin. Missouri just began this practice in 2010. Iowa is phasing the tax on Social Security benefits out and it will be completely exempting Social Security retirement income from the state income tax by 2014.


What States Tax Social Security Benefits

Six states model their income tax requirements for Social Security payments on Federal tax law. They are: Minnesota, Nebraska, North Dakota, Rhode Island, Vermont and West Virginia.

There are four states that have special rules and only tax Social Security Benefits if total earnings from all sources income is above a set income level and phase out amount. These states are: Connecticut, Iowa, Kansas, and Montana. In 2014, Iowa will completely exempt Social Security from state income taxation.

The remaining states: Colorado, New Mexico and Utah require all government untaxed Social Security benefits be added back to adjusted gross income (AGI) and then compute the base for application of their broad-based age-defined income exemptions.


More Information About State Taxation of Social Security Benefits

  • Connecticut allows taxpayers to fully exempt Social Security income from state income tax if income is less than $60,000 (for joint filers).
  • Kansas exempts Social Security benefits from state income tax if federal adjusted gross income is if $75,000 or under.
  • Missouri allows taxpayers with adjusted gross income of less than $100,000 (for joint filers) to deduct all of taxable Social Security benefits from income.
  • If a Colorado household meets certain age requirements, qualifying retirement income can be excluded from income if it is taxable under the federal income tax (it’s called the “pension exclusion” and is subject to a maximum amount).
  • A similar program exists in Utah, but it is administered as a credit and is phased-out once income exceeds a certain level.
  • In Montana, some Social Security benefits may be taxable, and the state advises taxpayers to fill out a worksheet to determine how the state taxable amount differs from the federally taxable amount. In general, if total income is below $32,000 for joint-filers, benefits will not be subject to tax.
  • In New Mexico, benefits are taxable but a person can qualify for an exemption if he or she is 65 years or older (see page 4A of this document to determine exact amount, which is based on income level).
  • Iowa exempts a certain portion of benefits from income tax, but this will increase to 100 percent in 2014.