Social Security holds significant importance for numerous Americans. retirement In reality, 40% of Americans aged 65 and above depend on Social Security for more than half of their income. according to the AARP Moreover, the location where you reside can significantly impact the amount of your Social Security check that you actually get to retain.
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Up to 85% of your Social Security benefits may be liable for federal tax based on your income level, and additionally, some states might impose their own income taxes on these benefits. The good news is that not all states do this. tax Social Security will shrink, with just nine expected to follow suit in 2025.
"The roster of states that don’t impose taxes on Social Security is significantly more extensive than those that do," stated Brian Kuhn CFP, CLU, SVP and financial advisor. Wealth Enhancement Group And every state establishes its own regulations, which can vary over time, as has been seen lately in Missouri and Nebraska.
In 2024, Missouri and Nebraska opted to eliminate taxes on Social Security benefits. Kansas followed suit halfway through the year after signing relevant legislation, making similar changes. The state will no longer tax Social Security moving forward. .
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Just 9 States Will Impose Taxes on Social Security in 2025
In 2025, only nine states will impose taxes on Social Security benefits. These states are:
- Colorado
- Connecticut
- Minnesota
- Montana
- New Mexico
- Rhode Island
- Utah
- Vermont
- West Virginia
Kansas has been removed from this list, and West Virginia is gradually eliminating Social Security taxes, with no state income tax on Social Security beginning in 2026.
"Every state includes tax rules that might offer deductions for people under specific income levels or age limits, which makes each one distinct," Kuhn explained.
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Many states will not levy taxes on Social Security benefits in 2025.
A majority of states, specifically 41 along with Washington, D.C., will not impose taxes on your Social Security benefits In 2025, according to existing legislation.
These states are:
- 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
- Washington, D.C.
- Wyoming
How Much do Retirees Save on Social Security Taxes in Those States?
Kuhn pointed out that you can calculate how much you’re saving on taxes — assuming you live in a state that does not tax Social Security benefits — by looking up the effective rate of tax you paid to your state for all taxed income sources and applying that to your total Social Security benefits.
"For instance, if your effective tax rate in your state was 5% and you received $30,000 in Social Security benefits, this would result in savings of $1,500," explained Kuhn.
This rule, however, doesn’t cover every scenario. Even within states where Social Security income is taxable, not everybody faces the complete tax burden. Take Colorado as an instance; people aged 65 years and above could exempt federal taxes on their Social Security from state taxation starting in 2022. By 2025, this total exemption will extend to those between 55 and 64 years old whose yearly adjusted gross incomes do not exceed $75,000 individually or $95,000 collectively when married and filing jointly.
Therefore, it's crucial to examine the particular regulations of your state along with your individual tax circumstances.
Nevertheless, when looking at the overall picture, the savings accumulated by retirees who do not pay taxes on their benefits are quite remarkable.
“For example, in Missouri, retirees stand to collectively save about $309 million annually,” stated Jeff Rose, CFP, who is the founder of Good Financial Cents. In Nebraska, the amount is around $17 million. This significant sum stays with retirees rather than getting absorbed by state taxes.
Jake Safane were involved in the research and writing of this piece.
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The piece initially surfaced on : 41 States That Don't Impose Taxes on Social Security Benefits in 2025