Social Security is a crucial source of retirement income for many Americans. According to AARP, around 40% of individuals aged 65 and older depend on Social Security for at least half of their income. However, your location can significantly impact the amount of your Social Security benefits that you are able to retain.
Up to 85% of your Social Security benefits may be subject to federal taxes, and depending on your income, certain states may also tax your Social Security income. Fortunately, the number of states that impose these taxes is decreasing. By 2025, only nine states will still tax Social Security benefits.
“The number of states that don’t tax Social Security is much greater than those that do,” said Brian Kuhn, CFP, CLU, SVP, and financial advisor at Wealth Enhancement Group. “Each state sets its own rules, which can change, as we’ve seen recently in Missouri and Nebraska.”
Both Missouri and Nebraska have decided to eliminate taxes on Social Security benefits starting in 2024. Additionally, Kansas passed legislation in 2024 that will also stop taxing Social Security income moving forward.
In 2025, only nine states will continue to tax 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 plans to fully end the taxation by 2026.
“Each state has specific tax rules that may offer deductions for individuals under certain income levels or age thresholds, making the tax landscape different in each state,” Kuhn explained.
In 2025, the majority of states—41 in total, plus Washington, D.C.—will not tax Social Security benefits, according to current laws.
These states are:
- Alabama
- Alaska
- Arizona
- Arkansas
- California
- Delaware
- Florida
- Georgia
- Hawaii
- Idaho
- Illinois
- Indiana
- Iowa
- 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 Can Retirees Save on Social Security Taxes in These States?
Kuhn noted that retirees can estimate their savings by checking the effective tax rate they pay on other income in states that don’t tax Social Security. They can then apply that rate to their total Social Security benefits to determine potential savings.
“For instance, if your effective tax rate is 5% and you receive $30,000 in Social Security benefits, you could save $1,500,” Kuhn explained.
However, not all retirees living in states that tax Social Security income will pay the full tax. In Colorado, for example, residents aged 65 and older have been able to fully deduct federally taxed Social Security benefits from their state income taxes since the 2022 tax year. Starting in 2025, this full exemption will extend to residents aged 55 to 64 with an adjusted gross income of $75,000 or less for individuals, or $95,000 or less for married couples filing jointly.
Therefore, it’s essential to understand the specific tax rules in your state and how they apply to your personal situation.
From a broader perspective, though, retirees who live in states that don’t tax Social Security benefits can see significant savings.
“In Missouri, for example, retirees are expected to save a total of approximately $309 million annually,” said Jeff Rose, CFP, founder of Good Financial Cents. “In Nebraska, that number is around $17 million. That’s a substantial amount of money that retirees get to keep, rather than having it taken away by state taxes.”
Conclusion:
With 41 states not taxing Social Security benefits in 2025, retirees have a significant opportunity to maximize their income. Choosing to live in a state with no Social Security tax can result in substantial savings, providing more financial security in retirement. It’s essential to stay informed about state tax rules to make the most of your retirement income.
FAQs
Which states won’t tax Social Security benefits in 2025?
41 states, including Florida, Texas, and Pennsylvania, will not tax Social Security benefits in 2025.
How can I calculate my savings on Social Security taxes?
Calculate your savings by applying your state’s tax rate to your Social Security benefits if your state does not tax them.
Will all states stop taxing Social Security benefits?
No, only a select number of states will not tax Social Security benefits, with some gradually phasing out the tax.
Can I still save on taxes in states that tax Social Security?
Yes, some states offer deductions or exemptions for certain retirees, reducing the amount taxed on Social Security benefits.