Social Security serves as a lifeline for millions of retired Americans, with 40% of those aged 65 and older relying on it for at least half of their income, according to the AARP. However, where you live significantly affects how much of your Social Security income you can keep. While federal taxes can take up to 85% of your benefits based on your income, state-level taxation varies widely. Fortunately, the majority of states in the U.S. do not tax Social Security benefits, and that number will grow in 2025.
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The Shrinking List of States That Tax Social Security
As of 2025, only nine states will continue to tax Social Security benefits:
- Colorado
- Connecticut
- Minnesota
- Montana
- New Mexico
- Rhode Island
- Utah
- Vermont
- West Virginia
The good news? Kansas, Missouri, and Nebraska have eliminated Social Security taxes. Missouri and Nebraska stopped taxing these benefits in 2024, and Kansas followed suit with a new law enacted mid-2024. Additionally, West Virginia plans to phase out Social Security taxes entirely by 2026.
“Each state has unique tax rules,” said Brian Kuhn, CFP, SVP at Wealth Enhancement Group. “These include deductions for individuals below certain income thresholds or ages, making taxation levels highly specific to your circumstances.”
41 States That Won’t Tax Social Security in 2025
Here’s the list of states (plus Washington, D.C.) where Social Security benefits will remain tax-free:
- Alabama
- Alaska
- Arizona
- Arkansas
- California
- Delaware
- Florida
- Georgia
- Hawaii
- Idaho
- Illinois
- Indiana
- Iowa
- Kansas
- 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
- Wyoming
- Washington, D.C.
How Much Can Retirees Save in These States?
The savings for retirees in states without Social Security taxes can be significant. For example, if your state’s effective income tax rate is 5% and you receive $30,000 in annual Social Security benefits, you could save $1,500 annually in taxes.
“In states like Missouri, retirees collectively save an estimated $309 million annually by avoiding Social Security taxes,” said Jeff Rose, CFP, founder of Good Financial Cents. “In Nebraska, the figure is around $17 million. This money stays in retirees’ pockets instead of going to state coffers.”
Special Exemptions in Taxing States
Even in the nine states that tax Social Security, many retirees may qualify for exemptions or deductions. For instance:
- Colorado: Residents aged 65+ can fully deduct federally taxed Social Security benefits. In 2025, this exemption will extend to those aged 55–64, provided their adjusted gross income (AGI) is $75,000 or less for individuals or $95,000 or less for couples filing jointly.
Understanding these exemptions is crucial to accurately calculate potential tax liabilities.
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What This Means for Retirees
The decision of where to retire can significantly impact your financial security. States without Social Security taxes provide a more retiree-friendly environment, allowing residents to stretch their benefits further. However, even in states with taxes, exemptions and deductions often soften the blow for lower-income individuals or older residents.
To maximize your retirement income:
- Research State Tax Laws: Understand how your state handles Social Security and other retirement income.
- Plan for Tax Changes: Be aware of future tax law changes, like those in West Virginia, which will stop taxing Social Security by 2026.
- Work with a Financial Advisor: Tailored advice can help minimize your tax burden and optimize retirement income.
Final Thoughts: Retirees Are Winning the Tax Battle
With the list of states taxing Social Security benefits shrinking, most Americans will keep more of their retirement income in 2025. As tax laws continue to evolve, staying informed and proactive can ensure you make the most of your Social Security benefits—no matter where you live.
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