Social Security benefits are meant to provide financial relief to retirees, but not all states treat these benefits equally when it comes to taxation. While some states exempt Social Security income from taxation entirely, others tax it to varying degrees. If you rely on Social Security benefits, it’s important to understand which states impose taxes on this income and how you can potentially avoid paying these taxes. Below, we’ve outlined the states that tax Social Security benefits in 2024 and provided useful steps you can take to minimize your tax burden.
States That Tax Social Security Benefits in 2024
As of 2024, several states still tax Social Security benefits. The tax rates and thresholds can vary significantly from state to state. Here’s a look at the states that impose taxes on Social Security income:
- Connecticut: Social Security benefits are taxed in Connecticut for residents with income above $75,000 (single) or $100,000 (married). The tax is based on your income level, and higher earners are taxed more.
- Minnesota: Minnesota also taxes Social Security benefits if your income exceeds certain thresholds. Social Security income is taxed for individuals with a combined income above $25,000 (single) or $32,000 (married filing jointly).
- Nebraska: Nebraska taxes Social Security benefits for residents with higher income levels. The state’s income tax applies to Social Security benefits if your income exceeds $44,000 (single) or $59,000 (married filing jointly).
- North Dakota: In North Dakota, Social Security benefits are taxed for individuals with a combined income above $50,000 (single) or $100,000 (married).
- Rhode Island: Social Security benefits are subject to state income tax if your total income exceeds $80,000 (single) or $100,000 (married).
- Utah: Utah includes Social Security benefits in taxable income for individuals whose total income exceeds $25,000 (single) or $32,000 (married).
- Vermont: Social Security benefits are taxed in Vermont if your income exceeds $45,000 (single) or $60,000 (married).
- Wisconsin: Wisconsin taxes Social Security benefits for individuals with a combined income over $25,000 (single) or $32,000 (married). However, there are some exemptions available based on your age and income.
How to Minimize or Avoid Social Security Taxation
While it’s impossible to completely avoid taxation on Social Security benefits in some states, there are steps you can take to minimize the amount you owe:
- Consider Relocating to a Tax-Friendly State: One of the most effective ways to avoid Social Security taxes is to move to a state that does not impose taxes on Social Security benefits. States like Florida, Texas, and Wyoming are popular among retirees due to their lack of state income tax.
- Optimize Your Income: You may be able to reduce the taxable portion of your Social Security benefits by managing other sources of income. For example, lowering your earnings from pensions, wages, or investment income can help keep your total income below taxable thresholds.
- Take Advantage of State-Specific Exemptions: Some states offer exemptions or deductions for Social Security income, especially for senior citizens. Research the specific exemptions available in your state and take full advantage of any deductions or credits you may qualify for.
- Use Tax-Advantaged Accounts: Contributing to tax-advantaged accounts like IRAs or 401(k)s can help reduce your overall taxable income. While this won’t directly affect Social Security benefits, reducing your overall taxable income may help prevent Social Security from being taxed.
- Plan Withdrawals Strategically: If you’re receiving retirement income from other sources, such as a 401(k), consider withdrawing funds strategically to avoid pushing your income into a taxable range.
States That Do Not Tax Social Security Benefits
If you’re looking to avoid taxes on your Social Security benefits altogether, consider living in one of the following states that do not tax Social Security income:
- Alabama
- Alaska
- Florida
- Hawaii
- Illinois
- Mississippi
- Nevada
- New Hampshire
- Pennsylvania
- South Carolina
- Tennessee
- Texas
- Washington
- Wyoming
FAQs
Q1: Which states tax Social Security benefits?
A1: States that tax Social Security benefits include Connecticut, Minnesota, Nebraska, North Dakota, Rhode Island, Utah, Vermont, and Wisconsin, among others. The amount of taxation depends on income thresholds set by each state.
Q2: Can I avoid Social Security taxes by moving to another state?
A2: Yes, you can avoid Social Security taxes by relocating to a state that does not tax Social Security income, such as Florida, Texas, or Wyoming.
Q3: How can I minimize my Social Security taxes?
A3: To minimize taxes, you can manage your overall income, take advantage of state-specific exemptions or deductions, or consider moving to a tax-friendly state.
Q4: Are there any exemptions for Social Security taxation in certain states?
A4: Some states offer exemptions or deductions for Social Security income, especially for seniors. It’s important to research your state’s specific exemptions to reduce your tax liability.
Q5: Is it possible to avoid paying taxes on Social Security benefits entirely?
A5: Yes, but only by living in a state that doesn’t tax Social Security benefits. You can also reduce your overall taxable income through strategic withdrawals from retirement accounts and other income management strategies.
