One of the major concerns for the older American generation is how long will their finances last during retirement. Yes, Social Security exists, but it only covers a portion of retirement income. Especially in a time where the price of goods and services is constantly increasing, it’s important to plan and budget accordingly. When Americans retire, the amount of benefits that they receive is different depending on where they live, this is because some states tax Social Security while others don’t.
The 41 states that do not tax Social Security benefits and the 9 that still do have a distinct line painted across the map of the United States by a recent government analysis.
Social Security: A Lifeline for Millions of Retirees
There are millions of Americans who rely on Social Security as a primary source of income. According to the Social Security Administration (SSA), nearly 50 million retirees depend on these benefits each month.
The factor that people don’t realize is that even though Social Security is a government program, states still have the power to tax these benefits. In simple terms, this means that retirees who receive the same amount of Social Security benefits will most likely take home a different amount depending on the states they live in.
The 41 States That Leave Social Security Untouched
The good news is that majority of U.S. states (41 states) do not tax Social Security benefits. In these places, retirees can rely on receiving their full benefit amount without worrying about state deductions.
Popular retirement locations like Florida, Nevada, Texas, and Arizona are included in this category; these states are already well-known for their pleasant temperatures and affordable cost of living. Additionally, it covers places like California, Pennsylvania, and New York, where living expenses may be greater but Social Security benefits provide retirees with some respite.
Those states are:
- California
- Alaska
- Arizona
- Arkansas
- Kansas
- Delaware
- Florida
- Georgia
- Alabama
- Hawaii
- Idaho
- Illinois
- Indiana
- Iowa
- Maryland
- Kentucky
- Missouri
- Louisiana
- Maine
- Michigan
- Mississippi
- New Hampshire
- Nebraska
- Massachusetts
- Nevada
- New Jersey
- North Carolina
- New York
- North Dakota
- Ohio
- Oklahoma
- South Dakota
- Oregon
- Washington, D.C.
- Pennsylvania
- Wyoming
- South Carolina
- Tennessee
- Texas
- Virginia
- Washington
- Wisconsin
The Nine States That Still Tax Social Security
There are nine other states that still tax Social Security:
- Vermont
- Rhode Island
- Colorado
- Minnesota
- Connecticut
- Montana
- New Mexico
- Utah
- Kansas
It’s important to remember that each state handles Social Security differently. There are some states that apply income limits, and this simply means that only high earners pay taxes on their Social Security benefits.
Why This Matters for Retirees
There are many American families who live on fixed incomes and even a small tax on Social Security benefits will cost them. Families rely on these benefits to cover their essential expenses and provide for their families.
Choosing to retire in a state that doesn’t tax retirement income can make a noticeable difference in long-term financial comfort.
Looking Ahead: Could More States Eliminate Taxes?
The cost of living continues to increase and law officials are under pressure to give retirees a break from taxes. Should they do this, it will make a major difference for those Americans who rely on Social Security as their primary source of income. The end goal is a peaceful retirement.
The Bottom Line
Beneficiaries must remember the states that they live matters during retirement, and it’s not just for lifestyle but also for how much money you will receive. There are currently 41 states that do not tax Social Security.
For all those approaching retirement, take a look at your options and see what will work best for you, especially in terms of providing financial stability.