41 States That Won’t Tax Social Security Benefits in 2025

As retirees plan for their golden years, one major consideration is how much of their Social Security benefits will be taxed. While federal taxes may apply depending on income levels, many states offer relief by not taxing Social Security benefits at all. For 2025, a total of 41 states fall into this category. Let’s explore which states these are, why they don’t tax Social Security, and how this impacts your financial planning.

What Are Social Security Benefits?

Social Security benefits are monthly payments from the federal government, providing financial support for retirees, disabled workers, and survivors of deceased workers. These benefits are funded through payroll taxes under the Federal Insurance Contributions Act (FICA).

Federal vs. State Taxation of Social Security

1. Federal Taxation:
   • Depending on your income, up to 85% of your Social Security benefits may be taxable federally.
   • Income thresholds determine whether benefits are taxed.
2. State Taxation:
   • Some states tax Social Security benefits, but 41 states do not.
   • Avoiding state taxes can save retirees thousands of dollars annually.

States That Won’t Tax Social Security Benefits in 2025

1. States With No Income Tax

These states automatically exempt Social Security from taxation since they do not collect any state income tax:

• Alaska
• Florida
• Nevada
• South Dakota
• Tennessee
• Texas
• Washington
• Wyoming

2. States That Exempt Social Security Benefits

The following states have an income tax but exempt Social Security benefits entirely:

• Alabama
• Arkansas
• Colorado
• Connecticut
• Delaware
• Georgia
• Hawaii
• Illinois
• Indiana
• Iowa
• Kansas
• Kentucky
• Louisiana
• Maine
• Maryland
• Massachusetts
• Mississippi
• Missouri
• New Jersey
• New Mexico
• New York
• North Carolina
• Ohio
• Oklahoma
• Oregon
• Pennsylvania
• South Carolina
• Virginia
• Wisconsin

Why Don’t These States Tax Social Security?

The decision to exempt Social Security from taxation often reflects a commitment to attracting retirees and reducing their financial burdens. States with no income tax or specific exemptions aim to:

• Support Retirees: Allow more income for living expenses.
• Attract Migration: Encourage retirees to settle in their state.
• Simplify Taxes: Avoid adding to retirees’ tax complexities.

States That Do Tax Social Security Benefits

Nine states still tax Social Security benefits to varying degrees in 2025:

• Utah: Taxes Social Security but offers a retirement credit.
• Nebraska: Phasing out Social Security taxes by 2025.
• Minnesota: Exempts a portion based on income.
• Other States Include: Vermont, West Virginia, Kansas, and Rhode Island.

How State Taxes Impact Retirees

1. Tax Savings:
   • Living in a state that doesn’t tax Social Security could save you thousands annually.
   • The savings increase for retirees who depend heavily on Social Security.
2. Other Taxes Matter:
   • Consider property taxes, sales taxes, and state income taxes, as these also impact your finances.
3. Cost of Living:
   • States with no Social Security tax may have a higher cost of living, offsetting the savings.

Financial Planning for Retirement

• Know Your State’s Tax Rules:
  Check whether your state taxes Social Security or offers exemptions.
• Consider Relocating:
  Moving to a tax-friendly state can reduce financial strain in retirement.
• Plan for Federal Taxes:
  Even if your state doesn’t tax Social Security, federal taxes may apply depending on your income.

Conclusion

Retiring in one of the 41 states that don’t tax Social Security benefits in 2025 can significantly reduce your tax burden and enhance your financial security. However, it’s essential to consider all aspects of a state’s tax and cost-of-living landscape. Proper planning ensures you maximize your retirement income while enjoying your golden years without financial stress.

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