12 States That Tax Social Security Benefits [2023]

Although we’ll be working for a few more years, my wife and I have started looking for a retirement home in a new location. Something near the beach or a lake would be nice. Not too far from family and friends, too.

Of course, as a tax writer, I’m also looking for a state with low income tax rates, a modest sales tax, and reasonable property taxes. But another important goal is to avoid states that tax Social Security benefits if at all possible.

The federal government is going to tax up to 85% of our Social Security benefits when we retire, but my wife and I don’t want to pay state taxes on this retirement income, too. So, while we’re not necessarily crossing states that tax Social Security income completely off our list of possible retirement locations, those states certainly have a strike against them.

If you’re in the same boat, check out my list of states that tax Social Security benefits. It includes states that only tax part of your Social Security payments or only taxes certain residents. I’ll also provide some other state tax information that might be helpful as you look for your own retirement dream home.

(Sales tax rates are provided by the Tax Foundation. Median property tax rates are based on 2021 data from the U.S. Census Bureau, which is the most recent data available.)

Colorado Taxes on Social Security Benefits

Technically, my wife and I wouldn’t have to worry about state taxes on Social Security income if we moved to Colorado. Why? Because Colorado only taxes Social Security payments if you’re younger than 65 years old, and we don’t plan to start receiving benefits until after our 65th birthday.

On the other hand, if you’re 55 to 64 years old, you can deduct up to $20,000 of Social Security income that’s taxed at the federal level—but anything above that amount is subject to Colorado income taxes. That’s why Colorado is on this list.

Other Colorado State Taxes

Personal Income Tax Rates—Colorado has a flat state income tax rate of 4.4%.

Income Tax on IRA and 401(k) Plan Withdrawals—If you’re at least 65 years old, you can deduct up to $24,000 of 401(k) or IRA distributions that are taxed at the federal level. If you’re between 55 and 64 years old, you can deduct up to $20,000.

Sales Taxes—Colorado’s statewide sales tax rate is a relatively low 2.9%, but local government rates can be as high as 8.3%. As a result, according to the Tax Foundation, the average combined state and local sales tax rate in Colorado is 7.791%, which is the 15th-highest in the U.S.

Property Taxes—From a statewide perspective, property tax bills are relatively low in Colorado. The median property tax rate for the entire state is only 0.48%, which is the fourth-lowest when compared to the median rates in all 50 states and the District of Columbia.

Estate and Inheritance Taxes—If you live in Colorado, your heirs will be happy to know that there are no state estate or inheritance taxes.

Connecticut Taxes on Social Security Benefits

My wife and I used to live in Connecticut, so it makes me sad to put the state on this list. But I don’t think we’ll be returning to the Nutmeg State in our golden years, in part because we don’t want to risk having to pay the state’s tax on Social Security income. (Although, as outlined below, Connecticut is cutting income taxes on other types of retirement income starting next year.)

There is some good news for Social Security recipients: You won’t have to pay the Connecticut tax on your benefits if your federal adjusted gross income for the year is below:

$75,000 if you’re single or a married person filing a separate tax return
$100,000 if you’re married filing jointly, a head-of-household filer, or a surviving spouse

However, if your income is above the applicable threshold, the state will tax 25% of either your total Social Security income for the year or your Social Security benefits subject to tax at the federal level, whichever is lower.

Other Connecticut State Taxes

Personal Income Tax Rates—For 2023, Connecticut state income tax rates start at 3% and go up to 6.99%. However, starting in 2024, the lowest rate will be 2%.

Income Tax on IRA and 401(k) Plan Withdrawals—For 2023, distributions from a 401(k) account are fully exempt if your federal adjusted gross income is less than:

$75,000 for single filers, married people filing a separate tax return, or head-of-household filers
$100,000 for married couples filing jointly

People with income below the $75,000/$100,000 threshold can also deduct 25% of any withdrawals from a traditional IRA in 2023.

Beginning with the 2024 tax year, a partial exemption (ranging from 2.5% to 85%) for 401(k) payments will be available if your income is between:

$75,000 and $99,000 for single filers, married people filing a separate tax return, or head-of-household filers
$100,000 and $149,000 for married couples filing jointly

The base deduction for IRA distributions jumps to 50% in 2024, to 75% in 2025, and to 100% in 2026 and thereafter. A partial exemption similar to the one provided for 401(k) distributions (i.e., same percentages and income ranges) kicks in next year, too.

Sales Taxes—Connecticut imposes a 6.35% sales tax. No local sales taxes are permitted, so the combined state and local sales tax rate is 6.35%, which is the 19th-lowest in the nation.

Property Taxes—Plan for a big property tax bill if you move to Connecticut. The median property tax rate in Connecticut is 1.96%, which is the third-highest in the country.

Estate and Inheritance Taxes—Connecticut imposes a 12% estate tax, but for 2023 it only applies to estates worth $12.92 million or more.

Kansas Taxes on Social Security Benefits

More Kansas residents almost dodged state taxes on Social Security benefits, but Gov. Laura Kelly vetoed a bill in April 2023 that would have expanded the existing partial tax exemption for Social Security income.

As a result, the current law will continue in Kansas (at least for now): If your federal adjusted gross income is greater than $75,000, Social Security benefits taxed at the federal level are also taxed by Kansas. If your income is below the $75,000 threshold, there’s no state tax on your Social Security payments.

Other Kansas State Taxes

Personal Income Tax Rates—The bill Gov. Kelly vetoed in April would also have switched Kansas to a flat, 5.15% state income tax rate starting in 2024. However, since that change didn’t happen, the Kansas tax rates continue to range from 3.1% to 5.7%.

Income Tax on IRA and 401(k) Plan Withdrawals—Under Kansas law, calculation of the state’s personal income tax begins with federal adjusted gross income. Since there are no state deductions from that amount for IRA and 401(k) distributions, withdrawals from those retirement accounts are taxed by Kansas to the same extent they’re taxed by the federal government. So, for example, if your federal adjusted gross income included $1,000 of IRA or 401(k) distributions, then that same $1,000 would be taxed by Kansas.

Sales Taxes—Sales taxes are on the high end in Kansas. There’s a 6.5% statewide sales tax, plus local governments can tack on up to 4.25% more. That pushes the average combined state and local sales tax rate to 8.75%, which is the ninth-highest in the nation.

Property Taxes—Property taxes lean high in Kansas, too. The state’s median property tax rate is 1.33%, which is the country’s 13th-highest rate.

Estate and Inheritance Taxes—No need to worry about an estate or inheritance tax in Kansas. The state doesn’t impose these types of “death taxes.”

Minnesota Taxes on Social Security Benefits

Minnesota just expanded its Social Security tax exemption. Under previously existing law, you can deduct Social Security benefits on your 2023 Minnesota tax return according to the following table.

YATI Tip: Provisional income is equal to modified adjusted gross income, as used for purposes of calculating federal taxes on Social Security benefits, plus one-half of the Social Security benefits taxed at the federal level for the year.

However, thanks to a new law signed by Gov. Tim Walz in May 2023, you can either claim the existing deduction outlined above or the new deduction reflected in the table below on your 2023 Minnesota tax return. You pick whichever one works best for you!

The phaseout threshold dollar amounts for the new deduction will be adjusted annually for inflation after 2023.

Other Minnesota State Taxes

Personal Income Tax Rates—The lowest Minnesota income tax rate is 5.35%. The highest rate is a comparatively high 9.85%.

Income Tax on IRA and 401(k) Plan Withdrawals—There are no special tax breaks under Minnesota law for withdrawals from an IRA or 401(k) account. As a result, they’re taxed by Minnesota to the same extent they’re taxed under federal law.

YATI Tip: While there’s no special tax break for IRA or 401(k) distributions, seniors age 65 or older can claim a special deduction of up to $9,600 ($12,000 for joint filers). Income limits apply.

Sales Taxes—Minnesota sales taxes are on the high side. There’s a 6.875% state tax, plus local taxes of up to 2%. The average combined state and local sales tax rate for Minnesota is 7.523, which is the 17th-highest in the U.S.

Property Taxes—At 1.02%, Minnesota’s median property tax rate is a little on the high end. That comes in as the 20th-highest amount among all 50 states and the District of Columbia.

Estate and Inheritance Taxes—Minnesota taxes estates valued at $3 million or more. The estate tax rates range from 13% to 16%.

Missouri Taxes on Social Security Benefits

Even though the state is on this list, my wife and I could relocate to Missouri and avoid taxes on Social Security payments—but we’d have to wait until next year to move. That’s because Missouri currently taxes Social Security benefits for some people, but no one in the Show Me State will have to pay state taxes on their benefits starting in 2024.

For 2023, there’s no Missouri income tax on Social Security income if your Missouri adjusted gross income is:

$85,000 or less if your state filing status is single, head of household, married filing separate, or qualifying widow(er)
$100,000 or less if your state filing status is married filing combined

If you’re above the applicable income threshold, Missouri will tax some or all of your Social Security payments that are taxed at the federal level. A partial exemption might be available, but it’s reduced by one dollar for every dollar that your income exceeds the $85,000 or $100,000 threshold.

However, starting in 2024, Missouri will no longer tax Social Security benefits thanks to legislation signed into law by Gov. Mike Parson in July 2023.

Other Missouri State Taxes

Personal Income Tax Rates—For 2023, the Missouri personal income tax rates start at 1.5% and go up to 4.95%.

In 2024, the top rate will drop to 4.8% if certain revenue collection goals are met. After that, three additional 0.1% reductions are possible in future years—for a potential top rate of 4.5%—if other revenue goals are satisfied.

Income Tax on IRA and 401(k) Plan Withdrawals—A deduction is available for up to $6,000 withdrawn from an IRA or 401(k) if your Missouri adjusted gross income is:

$25,000 or less if your state filing status is single, head of household, or qualifying widow(er)
$32,000 or less if your state filing status is married filing combined
$16,000 or less if your state filing status is married filing separate

If your income exceeds the applicable threshold amount, the deduction is reduced on a dollar-for-dollar basis.

Sales Taxes—Missouri imposes a 4.225% state-level sales tax, while local sales taxes up to 5.88% are possible. The averaged combined state and local sales tax rate is 8.362%, which is the 12th-highest in the country, according to the Tax Foundation.

Property Taxes—Missouri’s overall property tax burden is middle-of-the-road. The state’s median property tax rate is 0.88%, which ranks as the 29th-lowest rate in the nation.

Estate and Inheritance Taxes—Your heirs will love the fact that there’s no estate tax or inheritance tax in Missouri.

Montana Taxes on Social Security Benefits

While a house with a view near Flathead Lake sounds nice for a retirement destination, we’d have to pay the Montana tax on Social Security benefits if my wife and I moved out to Big Sky country.

Right now, the state’s tax on Social Security benefits is similar to the federal tax on this form of retirement income. However, the Montana tax might not match up exactly with the federal tax if your Montana adjusted gross income differs from your federal adjusted gross income.

But beginning with the 2024 tax year, the potential differences will be eliminated. Instead of making residents calculate Montana adjusted gross income on their state tax return, residents will start their state return with federal taxable income. Since there will be no adjustments to that amount for Social Security benefits, the amount of Social Security income subject to federal tax will also be subject to Montana tax.

Other Montana State Taxes

Personal Income Tax Rates—For the 2023 tax year, Montana income tax rates start at 1% and go up to 6.75%.

Starting in 2024, there will only be two Montana tax rates: 4.7% and 5.9%.

Income Tax on IRA and 401(k) Plan Withdrawals—When filling out a 2023 Montana tax return, up to $5,060 of certain pension and other retirement income (including IRA and 401(k) distributions) might be tax exempt if your federal adjusted gross income is $42,140 or less.

However, beginning with the 2024 tax year, the deduction for pension and other retirement income (along with the deduction for interest income received by seniors) is replaced with a new $5,500 deduction for each Montana taxpayer who is at least 65 years old.

Sales Taxes—There’s no state-level sales tax in Montana. Plus, local governments generally can’t impose their own sales tax, either. However, a few tourist areas (e.g., Whitefish, Big Sky, and West Yellowstone) can impose a “resort tax” of up to 3%.

Property Taxes—Property tax bills are generally on the low side in Montana, too. The state’s median property tax rate is 0.74%, which is the nation’s 19th-lowest rate.

Estate and Inheritance Taxes—Montana does not collect estate or inheritance taxes.

Nebraska Taxes on Social Security Benefits

Like Missouri, Nebraska will come off this list of states that tax Social Security benefits in 2024, thanks to legislation signed by Gov. Jim Pillen in May 2023.

Until then, though, seniors might owe state taxes on their 2023 Social Security income. If your federal adjusted gross income is below a certain level, 100% of your Social Security benefits are tax exempt. The income thresholds for 2023 have not yet been released (they’re adjusted annually for inflation), but for the 2022 tax year they were $61,760 for married couples filing jointly and $45,790 for everyone else.

If your income is above the applicable threshold, you can still claim a partial exemption on your 2023 Nebraska income tax return for 60% of your Social Security income taxed by the federal government.

Other Nebraska State Taxes

Personal Income Tax Rates—For 2023, the Nebraska personal income tax rates run from 2.46% to 6.64%.

The top rate drops to 5.84% for 2024, 5.2% for 2025, 4.55% for 2026, and 3.99% for 2027 and thereafter.

Income Tax on IRA and 401(k) Plan Withdrawals—Nebraska has no special tax breaks for IRA or 401(k) plan distributions, so whatever is subject to federal income tax is also subject to Nebraska’s tax.

Sales Taxes—Nebraska residents face a fairly average sales tax burden. The state rate is 5.5%, and local taxes can be as high as 2%. The average combined state and local sales tax rate is 6.971%, which is the 24th-lowest in the U.S.

Property Taxes—Real estate taxes are on the high side in Nebraska, with a median property tax rate of 1.51%. That’s the ninth-highest in the country.

Estate and Inheritance Taxes—Nebraska also imposes an inheritance tax, which is paid by your heirs. Depending on your relationship to them, their age, and the value of the property inherited, your heirs could pay inheritance tax at rates ranging from 1% to 15%.

New Mexico Taxes on Social Security Benefits

New Mexico doesn’t tax Social Security benefits for people with an adjusted gross income of:

$150,000 or less if your filing status is married filing jointly, head of household, or qualified widow(er)
$100,000 or less if your filing status is single
$75,000 or less if your filing status is married filing separately

If you exceed the applicable income threshold, your Social Security income is subject to New Mexico taxes to the same extent it’s subject to federal income taxes.

Other New Mexico State Taxes

Personal Income Tax Rates—State income tax rates in New Mexico start at 1.7% and rise to 5.9%.

Income Tax on IRA and 401(k) Plan Withdrawals—If you’re at least 65 years old, you can deduct up to $8,000 of income—including IRA and 401(k) withdrawals—on your New Mexico tax return.

YATI Tip: If you’re at least 100 years old, all your income is exempt from New Mexico taxes.

Sales Taxes—The state sales tax rate in New Mexico is 4.875%, but some local governments tack on an additional 4.06%. According to the Tax Foundation, this results in an average combined state and local sales tax rate of 7.601%, which is the 16th-highest rate in the country.

Property Taxes—The median property tax rate in New Mexico is only 0.73%, which is the 18th-lowest in the country.

Estate and Inheritance Taxes—Estate planning is easier in New Mexico, since the state has no estate or inheritance tax.

Rhode Island Taxes on Social Security Benefits

You won’t owe Rhode Island taxes on your Social Security benefits if your federal adjusted gross income is below a certain amount. The Rhode Island Department of Revenue hasn’t released the 2023 income thresholds yet, but the amounts for the 2022 tax year were:

$119,750 for married couples filing jointly or a qualifying widow(er)
$95,800 for all other taxpayers

However, if you exceed the applicable income threshold, your Social Security payments will be taxed by Rhode Island to the same extent that they’re taxed by the federal government.

Other Rhode Island State Taxes

Personal Income Tax Rates—The lowest tax rate in Rhode Island is 3.75%, while the highest rate is 5.99%.

Income Tax on IRA and 401(k) Plan Withdrawals—If you’ve reached your full retirement age (as defined by the Social Security Administration) and don’t exceed certain income thresholds, you can deduct up to $20,000 of 401(k) distributions and other common forms of retirement income (but not IRA withdrawals) from your Rhode Island taxable income.

The 2023 income thresholds haven’t been released yet, but the 2022 thresholds were the same as the 2022 amounts for the Social Security income deduction (i.e., $119,750 or $95,800).

Sales Taxes—The Rhode Island sales tax is very average. There’s a 7% state sales tax, but there’s no local sales tax in the state. With a combined state and local rate of 7%, Rhode Island claims the 25th-highest rate in the nation (like I said, very average).

Property Taxes—Like other states in the northeast, Rhode Island has higher-than-average property tax rates. The state’s median property tax rate is 1.3%, which is 15th-highest in the U.S.

Estate and Inheritance Taxes—Rhode Island imposes an estate tax. The rates run from 0.8% to 16%, but for 2023 the tax only applies to estates worth $1,733,264 or more.

Utah Taxes on Social Security Benefits

Utah has a unique way of handling its tax on Social Security income. Instead of a tax deduction or exemption, Utah uses a tax credit to reduce or eliminate the state tax on Social Security recipients.

But there are income limits restricting who can claim the full tax credit, so some higher-income residents end up paying state income tax on at least some of their Social Security payments. The good news is that fewer Utah residents will have to pay state income taxes on their Social Security benefits thanks to tax legislation signed by Gov. Spencer Cox in March 2023 that raised the income limits.

The full tax credit is equal to the amount of Social Security benefits taxed on the federal level multiplied by the Utah income tax rate (4.65%). However, starting with the 2023 tax year, the credit is reduced if your Utah modified adjusted gross income is above the following applicable amount:

$37,500 for a married person filing a separate tax return ($31,000 before 2023)
$45,000 for a single filers ($37,000 before 2023)
$75,000 for married couples filing jointly, head-of-household filers, and surviving spouses ($62,000 before 2023).

Your tax credit is reduced by $0.025 for every dollar over the applicable income threshold.

Other Utah State Taxes

Personal Income Tax Rates—Utah has a flat state income tax rate of 4.65%.

Income Tax on IRA and 401(k) Plan Withdrawals—There’s a very narrow tax deduction for distributions from a traditional 401(k) plan, but it only applies if, at the time the money was put into the account, the withdrawn funds were taxed by another state, the District of Columbia, or a U.S. possession. Otherwise, there are no other Utah tax breaks for IRA or 401(k) distributions.

YATI Tip: People born before 1953 qualify for a Utah tax credit of up to $450 if they don’t claim either the credit for Social Security benefits or for military retirement income.

Sales Taxes—Sales taxes are a little on the high side in Utah. There’s a 4.85% state sales tax, 1.25% in mandatory local taxes, and additional local taxes of up to 4.2%. According to the Tax Foundation, this results in an average combined state and local sales tax rate of 7.198%, which is the country’s 21st-highest rate.

Property Taxes—Property taxes are on the low side, though. Utah’s median property tax rate is only 0.52%, which is 8th-lowest rate in the nation.

Estate and Inheritance Taxes—Another plus is that there are no estate or inheritance taxes in Utah.

Vermont Taxes on Social Security Benefits

In Vermont, the state won’t tax Social Security benefits if your federal adjusted gross income is:

$65,000 or less for married couples filing a joint tax return
$50,000 or less for everyone else

If your income is above the applicable amount, you might qualify for a partial tax exemption if your federal adjusted gross income is between:

$65,001 and $74,999 for joint filers
$50,001 and $59,999 for other people

If your income exceeds the income thresholds for a partial tax break, then Vermont taxes your Social Security benefits to the same extent they’re taxed under federal law.

Other Vermont State Taxes

Personal Income Tax Rates—Vermont’s state income tax rates start at 3.35% and run as high as 8.75%.

Income Tax on IRA and 401(k) Plan Withdrawals—Since there are no special tax breaks for IRA or 401(k) plan distributions, withdrawals from those types of retirement accounts are taxed by Vermont to the same extent they’re taxed under the federal income tax law.

Sales Taxes—Vermont sales taxes are a little below average. The state imposes a 6% tax, while local governments can add an additional 1% tax. All in all, the average combined state and local sales tax rate in Vermont is 6.359%. That’s the 20th-lowest rate in the country.

Property Taxes—Vermont property taxes, on the other hand, are well above the national average. At 1.73%, the state has the fifth-highest median property tax rate in the nation.

Estate and Inheritance Taxes—Vermont also taxes estates worth $5 million or more at a 16% rate.

West Virginia Taxes on Social Security Benefits

West Virginia won’t tax your Social Security benefits if your federal adjusted gross income is:

$100,000 or less for married couples filing jointly
$50,000 or less for all other taxpayers

However, if your income is greater than the applicable dollar amount, West Virginia will levy a state income tax on your Social Security payments to the same extent you must pay taxes on that income to the federal government.

Other West Virginia State Taxes

Personal Income Tax Rates—West Virginia state income tax rates range from 2.36% to 5.12%. However, beginning in 2025, the rates can be lowered each year if certain revenue collection thresholds are exceeded, but no more than 10% per year.

Income Tax on IRA and 401(k) Plan Withdrawals—West Virginia taxes IRA and 401(k) distributions to the same extent they’re taxed at the federal level.

YATI Tip: If you’re at least 65 years old, you can automatically deduct up to $8,000 from your West Virginia taxable income.

Sales Taxes—West Virginia imposes a 6% state-level sales tax, while local governments can tack on an additional 1%. According to the Tax Foundation, the average combined state and local sales tax rate in West Virginia is 6.566%, which is the 21st-lowest in the country.

Property Taxes—The median property tax rate in West Virginia is only 0.55%, which is the 11th-lowest in the U.S.

Estate and Inheritance Taxes—Residents of West Virginia don’t have to worry about a state-level estate or inheritance tax.

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