38 Countries That Don’t Tax Social Security Benefits | personal financing

(Robin Hartell, CFP®)

Extending Social Security screening enough to cover basic expenses is a major challenge for many retirees. According to the Senior Citizens’ Association, Social Security benefits buy about 30% less today than they did in 2000. Why? Large families spend a disproportionate share of their budgets on things like health care and housing, which are rising much faster than the rate of inflation that determines cost-of-living adjustments.

If Social Security is going to make up a large portion of your retirement income, the last thing you want is to give up a portion of your benefits for state taxes. Fortunately, the 38 states and the District of Columbia will not compromise your advantages.

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These 38 states won’t touch your Social Security

If you live in one of these 38 states or the District of Columbia, you don’t have to worry about state Social Security taxes. Nine of these states have no state income taxes: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming (note that New Hampshire charges tax interest and dividend income). In other states, Social Security benefits are not considered taxable income.

  • Alabama
  • Alaska
  • Arizona
  • Arkansas
  • California
  • Delaware
  • Florida
  • Georgia
  • Hawaii
  • Idaho
  • Illinois
  • Indiana
  • Yes
  • Kentucky
  • Louisiana
  • who
  • Maryland
  • Massachusetts
  • Michigan
  • Mississippi
  • 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

This does not mean, however, that you will completely avoid taxes on your Social Security checks. Benefits are still taxable at the federal level if your income exceeds certain limits.

For individual applicants with income between $25,000 and $34,000, up to 50% of benefits are taxable. Up to 85% of your benefits are subject to tax if you are a single file holder whose income is more than $34,000.

Up to 50% of benefits are taxable for spouses who file a joint return and who have joint income between $32,000 and $44,000. Up to 85% of benefits are taxed for spouses whose combined income exceeds $44,000.

12 Countries Where Social Security Is Taxable

In the following 12 states, Social Security benefits are taxed in some circumstances. However, many states do not tax benefits for retirees whose income is below certain limits, or allow retirees to protect part of their benefits from state taxes.

  • Colorado
  • Connecticut
  • kansas
  • Minnesota
  • Missouri
  • Montana
  • Nebraska
  • New Mexico
  • Rhode Island
  • Utah
  • Vermont
  • West Virginia

Should You Worry About State Social Security Taxes?

If you’re concerned about taxes in retirement, state Social Security taxes may be a factor in where you spend your golden years. However, it is important to consider the overall tax picture.

Property taxes can put a serious strain on your retirement budget if you live in an area with high housing costs. You should also consider sales taxes and whether your state taxes capital gains and other investment income. Finally, if you have a high net worth, property taxes may also be taken into account.

You obviously don’t want to give up a portion of your state government’s Social Security benefits if you don’t have to. But look at your total tax bill when deciding which state will become your retirement home.

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