Social Security benefits are a crucial income source for millions of American retirees. However, these benefits may be subject to taxes, depending on the state and federal rules. The good news is that most states do not tax Social Security benefits.
In fact, 41 states and Washington, D.C. currently do not impose any taxes on these benefits. This list includes states like Massachusetts, Mississippi, New Hampshire, North Carolina, North Dakota, Pennsylvania, South Carolina, and South Dakota. Some states have recently eliminated their Social Security taxes.
For example, Missouri, Nebraska, and Kansas all did away with these taxes in 2024. Unfortunately, there are still nine states that do tax Social Security benefits.
Most states don’t tax benefits
These states are Connecticut, Rhode Island, and West Virginia. While there is no way to predict how long these states will continue to tax Social Security, some are taking steps to reduce or eliminate these taxes. West Virginia, for instance, has enacted a law to phase out the state income tax on Social Security over three years for individuals making under $50,000 and joint filers making under $100,000.
It is important to note that even if your state does not tax Social Security, you may still be subject to federal taxes on your benefits. The IRS uses your “combined income” to calculate your tax bill, which includes all your non-Social Security income, nontaxable interest, and half of your Social Security benefits for the current year. The amount of your Social Security benefits that are eligible to be taxed depends on your combined income.
For example, if you are married, filing jointly, and have a combined income of over $44,000, 85% of your benefits would be added to your other income and then taxed at your regular income tax rate. Knowing how and where Social Security benefits are taxed can help you better plan your retirement finances and potentially save a significant amount on taxes. It is always a good idea to check with your state’s rules and consult with a tax professional to understand how your benefits may be impacted.