What States Tax Social Security

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Even the best retirement plans sometimes fail to consider what states tax Social Security retirement benefits. As of 2016, your Social Security retirement benefits are taxed in 13 out of 50 states. Where you live can affect how much you have to live on.

According to Social Security, the 13 states that currently tax Social Security retirement benefits are West Virginia, Colorado, Vermont, Connecticut, Utah, Kansas, Rhode Island, Minnesota, North Dakota, Missouri, New Mexico, Montana, and Nebraska. Visit the Social Security website to review the “Taxes” section.

Social Security Retirement Benefits and States Taxation

According to the Wall Street Journal, some states that tax Social Security retirement benefits aren’t bad places to live in retirement. West Virginia and Colorado are less expensive places to live when property taxes, sales tax, and income taxes are considered.

That’s why it’s important to think about the place you call home as a retiree. You should plan for the impact of state tax if your home base is in one of these 13 states.

However, if you’re considering a move from a high tax state to a more tax-friendly one, the Kiplinger Report says that many of the places where workers build wealth, such as California, Oregon, Minnesota, New York, Vermont, New Jersey, Connecticut, and Rhode Island, are the least tax-friendly places to live as a retiree:

  • In contrast, Florida, Delaware, Georgia, Alaska, Nevada, Arizona, Wyoming, South Dakota, and Mississippi are less expensive and also tax-friendly places to buy or build a retirement home.
  • Coincidentally, Alaska, Nevada, Arizona, Wyoming, South Dakota, Louisiana, Mississippi, Georgia, Florida and Delaware don’t assess an income tax on residents.
  • What you consume could affect where you retire as well. Several states, including New Hampshire, Delaware, Montana, Oregon, and Alaska have no sales tax.

Unfavorable State Tax Environments and Social Security Retirees

According to the numbers, the most unfavorable states for Social Security retirees include California, New York, New Jersey, Vermont, Connecticut, Rhode Island, Minnesota, Nebraska, Montana, and Oregon. Residents of Hawaii, California, Oregon, Minnesota, Iowa, New Jersey, and Vermont also pay the highest top tax rates on income.

Estate planning and inheritance taxes are also an important consideration for many retirees in the United States. If you’re concerned about passing on what you’ve accumulated to heirs, it’s important to note that the states of Maine, Vermont, Massachusetts, Connecticut, Rhode Island, New York, Pennsylvania, New Jersey, Delaware, Maryland, Kentucky, Tennessee, Illinois, Iowa, Minnesota, Nebraska, Washington, Oregon, and Hawaii have the highest rates in the land.

Social Security Retirement Benefits and Your Home State

It’s important to consider taxes as a part of your retirement financial plan. Where you live can increase your tax burden. Your Social Security retirement benefits can be considered as a source of income in the 13 states listed above. Since state taxes aren’t withheld from your monthly Social Security retirement benefit, it’s important to budget these taxes.

Plan ahead.Youreceive a tax form from Social Security about your benefits. Your Social Security retirement benefits may be subject to state taxation based upon your calculated income for the year and your filing status (individual or joint return). It’s important to review your My Social Security Account on a regular basis. If you haven’t already claimed benefits, use tools on the SSA.gov website to estimate your Social Security retirement benefits.

According to the Wall Street Journal, most states don’t tax your Social Security retirement benefits, including Maine, New Hampshire, Massachusetts, New York, Pennsylvania, New Jersey, Delaware, Maryland, Virginia, North Carolina, South Carolina, Georgia, Florida, Tennessee, Kentucky, Ohio, Indiana, Michigan, Alabama, Mississippi, Illinois, Wisconsin, Iowa, Arkansas, Louisiana, Oklahoma, Texas, South Dakota, Wyoming, Arizona, Idaho, Washington, Oregon, California, Nevada, Arizona, Alaska, and Hawaii. (The District of Columbia doesn’t charge taxes on Social Security retirement benefits either.)
If you’re approaching retirement and want to save money, moving to a state that doesn’t assess state taxes on your Social Security benefits could be relevant to you. Relocation can also stretch how much you spend in property tax credits, purchases, fuel, and luxury taxes.