Do Any States Without an Income Tax Also Not Tax Social Security Benefits and Pensions?

Across the United States, different states have varying rules regarding the taxation of Social Security benefits and pensions. In this article, we'll explore which states do not impose income taxes and whether they also exempt Social Security and pension benefits from taxation.

States That Tax Social Security

As of the latest data, only 13 states impose taxes on Social Security benefits. These states are:

Colorado Connecticut Kansas Minnesota Missouri Montana Nebraska New Mexico North Dakota Rhode Island Utah Vermont West Virginia

It's interesting to note that fewer states do not tax federal pension benefits, but a significant number of states do not levy income taxes at all. The states that do not tax federal pensions include:

Alaska Florida Nevada South Dakota Tennessee Texas Washington Wyoming New Hampshire Alabama Hawaii Mississippi Pennsylvania

Generally, about 90% of a federal pension is federally taxable, and it can make around 85% of Social Security taxable.

States Without an Income Tax and Their Policies

Some states have taken the step of not imposing an income tax at all. As of 2024, Illinois remains the only state that does not tax Social Security benefits or pensions.

Example of Income Tax-Free States

Several U.S. states do not have an income tax and also do not tax Social Security benefits and pensions. Here are the states that meet these criteria:

Florida: No state income tax, and it does not tax Social Security benefits or pensions. Texas: No state income tax, and it does not tax Social Security benefits or pensions. Wyoming: No state income tax, and it does not tax Social Security benefits or pensions. Nevada: No state income tax, and it does not tax Social Security benefits or pensions. Washington: No state income tax, and it does not tax Social Security benefits or pensions. Alaska: No state income tax, and it does not tax Social Security benefits or pensions.

It's important to note that even states without an income tax may have specific exemptions or lower tax rates on certain types of retirement income, including pensions.

Conclusion

Tax policies can vary widely, and it's crucial to stay informed about the latest changes. If you're planning your retirement, it might be beneficial to consider living in one of these tax-free states to minimize your tax burden. Always consult the latest tax regulations to ensure you are up to date with the current laws.

FAQ

Q: Are there any other states without an income tax?

A: Some additional states without an income tax include New Hampshire, Alabama, and Pennsylvania. However, these states may have specific exemptions or lower tax rates on certain types of retirement income.

Q: What happens if my state taxes Social Security benefits?

A: If your state taxes Social Security benefits, it typically takes a percentage of your total income. It's a good idea to check the specific tax rates and exemptions in your state.

Q: Can I avoid income tax by moving to a state with low property taxes?

A: Yes, you can consider moving to a state with low property taxes, such as Wyoming, where property taxes are relatively low, but go to a county two south like Dallas, where property taxes can be significantly higher.