Which States Tax Social Security Benefits?
People who collect Social Security Retirement Benefits often want to move to a state where there is no state income tax. there are ten such states, they are: Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas and Wyoming. Since all have no income tax, Social Security retirement benefits will not be taxed. The two most popular states for retirees are Florida and Nevada. This is because of weather.
When deciding if they are going to move, retirees should keep in mind that non-income tax states may have hefty real estate and sales taxation
However there are many states (27) and the District of Colombia that have a state income tax but fully exempt Social Security retirement benefits from this tax. They are: Alabama, Arizona, Arkansas, California, Delaware, Georgia, Hawaii, Idaho, Illinois, Indiana, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Virginia and Wisconsin. Missouri just began this practice in 2010. Iowa is phasing the tax on Social Security benefits out and it will be completely exempting Social Security retirement income from the state income tax by 2014.
Six states model their income tax requirements for Social Security payments on Federal tax law. They are: Minnesota, Nebraska, North Dakota, Rhode Island, Vermont and West Virginia.
There are four states that only tax Social Security if total earnings from all sources income is above a set income level. These states include: Connecticut, Iowa, Kansas, and Montana. As mentioned earlier, by 2014 Iowa will completely exempt Social Security from state income taxation. Retired Iowans now pay only if their income is $75,000 or above.
The remaining states: Colorado, New Mexico and Utah require all government untaxed Social Security benefits be added back to adjusted gross income (AGI) and then compute the base for application of their broad-based age-defined income exemptions.