For retirees relying on Social Security benefits, taxes can significantly impact monthly income. While the federal government may tax up to 85% of Social Security benefits depending on income, some states also impose their own taxes. However, 15 states have opted out, allowing retirees to keep more of their benefits.
If you’re considering relocating or just want to know if your state offers tax-free Social Security, here’s a breakdown of the 15 states that won’t tax Social Security benefits in 2025.
States That Don’t Tax Social Security Benefits
As of 2025, these states do not impose state taxes on Social Security benefits:
- Alaska
- Florida
- Nevada
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
- New Hampshire
- Alabama
- Illinois
- Iowa
- Mississippi
- Pennsylvania
- Hawaii
Why These States Don’t Tax Social Security
The majority of these states have no state income tax (e.g., Florida, Texas, Nevada), while others have specific retirement-friendly tax policies that exempt Social Security income. For example:
- Illinois and Pennsylvania: Exempt all retirement income, including Social Security.
- Mississippi and Alabama: Not only exclude Social Security but also don’t tax most pension income.
- New Hampshire and Tennessee: These states tax only dividends and interest income, not Social Security.
How Much Can Taxes Impact Social Security?
In states that do tax Social Security, how much you pay depends on income levels and deductions. For example:
- Colorado, Kansas, and Nebraska tax benefits above certain income thresholds.
- Minnesota and Vermont have tax brackets that determine how much of Social Security is taxed.
Choosing to live in a Social Security tax-free state can increase your retirement income, helping you stretch your savings further.
Other Factors to Consider
While avoiding Social Security taxes is important, also consider:
- Cost of Living: Some tax-free states (e.g., Hawaii, Washington) have a high cost of living, which may offset tax savings.
- Sales & Property Taxes: States like Texas and Tennessee have no income tax but higher sales or property taxes.
- Healthcare & Quality of Life: Access to affordable healthcare and senior services is just as crucial as tax rates.
Final Thoughts
If you’re planning for retirement, understanding how Social Security is taxed at the state level can help you make a smart financial decision. The 15 states listed above won’t tax your Social Security benefits in 2025, potentially saving you thousands of dollars over time.
For more information on Social Security tax policies and state laws, visit the Social Security Administration’s website.
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