41 States That Won’t Tax Social Security Income in 2024 (Updated)
This article takes a look at the 41 states that won’t tax Social Security Income in 2024. If you wish to skip our detailed analysis on navigating Social Security, you may go to 10 States That Won’t Tax Social Security Income in 2024.
On Navigating Social Security
More than 71 million beneficiaries receive Social Security and Supplemental Security Income (SSI) benefits in the United States of America. As of 2024, they were also entitled to a 3.2% Cost of Living Adjustment (COLA) to keep these benefits aligned with inflation. Albeit smaller than the 8.7% COLA that beneficiaries received back in 2023, the smaller raise implies that inflation in the country is finally witnessing some moderation.
If one perceives this year's COLA as small, the anticipation for what 2025 holds may prove even more eye-opening. Based on current inflation data, The Senior Citizens Group estimates that Social Security benefits will increase by 2.4% by 2025 only. This revelation may come as a surprise to individuals unfamiliar with the mechanics of this adjustment. Even for those well-versed in its workings, there remains a prevailing sentiment that their COLAs fall short of expectations, notwithstanding the mitigating effects of inflation.
"Social Security benefits generally do keep up with inflation, though there is a lag,"
-Rob Williams, managing director for financial planning, retirement income, and wealth management at the Schwab Center for Financial Research, The Charles Schwab Corporation (NYSE:SCHW).
Nevertheless, it must be noted here that Social Security isn't meant to be a complete replacement of one's retirement income. Rather, it is one of the "three-legged stools" of retirement income.
Here is what Rob from The Charles Schwab Corporation (NYSE:SCHW) further has to say about Social Security:
"If anything, these changes are a reminder that retirees' incomes aren't truly fixed. Social Security benefits can change from year to year, and retirees can and should adjust their spending as their situation and the broader economic and financial environment evolve”.
If anything can be learned from these pointers from The Charles Schwab Corporation (NYSE:SCHW), it is that Social Security mustn’t be your sole source of income in retirement. For those who are solely reliant on Social Security, things can get hard fast. Moreover, with these funds expected to be depleted by 2034, things are looking gloomy as beneficiaries expect cuts from then onward.
By the way, our website's expertise is in identifying stocks that insiders and hedge funds are piling into, and Charles Schwab is one of the those companies. Here is what one of those investors recently said about this promising stock: "Charles Schwab is notable because the business and the stock both had a challenging year. The regional banking panic in the spring of 2023 created an opportunity for us to add to our position below $50 per share. Rising interest rates have impacted the business in ways both predictable and unpredictable, but the net result has been a crimping of earnings that will likely persist for another year or two. Critically, we do not believe any of these transitory dynamics pose, or ever posed, any existential risk to the business. Further, Schwab’s enviable, high-return franchise remains, in our view, entirely intact. If we are right on both these counts, we should generate an attractive return from the current stock price across a range of long-term interest rate scenarios." SCHW shares returned nearly 40% over the past year and as long-term interest rates fall over the next 12 months, SCHW should continue to deliver positive returns. You can find other stocks with huge upside potential on Insider Monkey. Now let's go back to our discussion about the social security benefits.
According to Turbo Tax by Intuit Inc. (NASDAQ:INTU), individuals who only have Social Security benefits in retirement don't have to include them in their gross income. According to these guys from Intuit Inc. (NASDAQ:INTU), your gross income will therefore be equal to zero, and you won't have to file a federal income tax return. For those who have income that is not tax-exempt, they may have to pay income taxes in retirement.
If an individual's total income exceeds $25,000, or $32,000 for a married couple filing jointly, federal income taxes must be paid on their Social Security benefits. Below these thresholds, benefits remain un-taxed. It should also be noted here that the IRS will not tax more than 85% of your Social Security benefits.
For those who think that federal government tax on social security is a bummer, they should know that many states also tax these benefits at the state level. Yes, it’s true, Social Security is taxable in 2024 in quite a few states. The states that tax Social Security benefits in 2024 are Colorado, Connecticut, Kansas, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont and West Virginia.
With that said, let’s check out all the states that don’t tax Social Security benefits in 2024.
A close-up of a person's hands counting a stack of coins, illustrating the importance of retirement solutions.
Methodology
To compile the list of states that won’t tax social security, we began by listing out all the states in the USA and the District of Columbia. Next, we methodically examined their tax regulations about retirement income. After selecting states that won’t tax social security in 2024, we ranked them on their cost of living index and overall tax-friendliness to award them with a unique Insider Monkey Score. States and Washington DC were then ranked based on this IM score in ascending order from the lowest to the highest scores.
It's important to note that tax laws can vary and change over time, so it's advisable to verify the tax details with official sources or consult a tax professional for the most up-to-date and accurate information. Some tax
By the way, Insider Monkey is an investing website that tracks the movements of corporate insiders and hedge funds. By using a similar consensus approach, we identify the best stock picks of more than 900 hedge funds investing in US stocks. The top 10 consensus stock picks of hedge funds outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). Whether you are a beginner investor or a professional one looking for the best stocks to buy, you can benefit from the wisdom of hedge funds and corporate insiders.
Here are all the States That Won’t Tax Social Security:
41. California
Insider Monkey Score: 5
Cost of Living Index: 138.5
Tax Friendliness: Not Tax Friendly
Of all the states that won’t tax Social Security income in 2024, the state that scores the least on our list is California. While Social Security isn’t taxed here, other forms of retirement income are. Top it with a cost of living that is 38.5% higher than the national average, and you’ll know why this state isn’t exactly a retiree favorite.
40. Hawaii
Insider Monkey Score: 5
Cost of Living Index: 180.3
Tax Friendliness: Moderately Tax Friendly
Falling amidst the states that don’t tax social security or pensions, Hawaii is considered a moderately tax-friendly state with an exorbitantly high cost of living.
39. Washington, D.C.
Insider Monkey Score: 6
Cost of Living Index: 146.8
Tax Friendliness: Moderately Tax Friendly
Not a state, but Washington DC doesn’t tax Social Security benefits either. Similar to Hawaii, the cost of living is insanely high for a retiree, and most other income from retirement accounts is taxed.
38. Massachusetts
Insider Monkey Score: 7
Cost of Living Index: 146.5
Tax Friendliness: Moderately Tax Friendly
Next up on our list of states that won’t tax Social Security income in 2024 is Massachusetts. This state is also moderately tax-friendly with a cost of living that is 46.5% higher than the national average.
37. New York
Insider Monkey Score: 9
Cost of Living Index: 125.9
Tax Friendliness: Moderately Tax Friendly
In the state of New York, all Social Security benefits are exempt from taxation. Income from retirement accounts or a private pension is taxed with deductions up to $20,000.
36. Maryland
Insider Monkey Score: 11
Cost of Living Index: 116.5
Tax Friendliness: Moderately Tax Friendly
Joining the list of states that won’t tax Social Security income in 2024 is Maryland. However, withdrawals from IRAs and pensions are taxed here. It is also the only state to have both an estate tax and an inheritance tax.
35. Maine
Insider Monkey Score: 13
Cost of Living Index: 109.9
Tax Friendliness: Not Tax Friendly
Social Security or Railroad Retirement benefits are not taxed in Maine. However, some forms of retirement income are taxed at rates as high as 7.15%. There is a pension exclusion of up to $30,000 ($35,000 in 2024).
34. Oregon
Insider Monkey Score: 13
Cost of Living Index: 114.7
Tax Friendliness: Moderately Tax Friendly
Another moderately tax-friendly state, Oregon is another state that won’t tax Social Security income in 2024 but most other sources of retirement income are taxed here.
33. Arizona
Insider Monkey Score: 17
Cost of Living Index: 108.4
Tax Friendliness: Moderately Tax Friendly
A popular state to retire to in the US, Arizona is home to a large percentage of seniors. The state doesn’t tax Social Security benefits, boasts over 300 days of sunshine, and is home to picturesque national parks and desert landscapes.
32. North Carolina
Insider Monkey Score: 24
Cost of Living Index: 95.3
Tax Friendliness: Moderately Tax Friendly
Another retiree favorite, North Carolina appeals to retirees largely because of its low cost of living.
31. Washington
Insider Monkey Score: 26
Cost of Living Index: 116
Tax Friendliness: Tax Friendly
Washington may be tax-friendly and won't tax your Social Security income in 2024, but it still has a cost of living that is 16% higher than the national average.
30. Wisconsin
Insider Monkey Score: 26
Cost of Living Index: 95.1
Tax Friendliness: Moderately Tax Friendly
Another moderately tax-friendly state, Wisconsin makes it up with a cost of living that is 4.9% lower than the national average.
29. Ohio
Insider Monkey Score: 27
Cost of Living Index: 94.7
Tax Friendliness: Moderately Tax Friendly
Will Ohio tax Social Security in 2024? The state of Ohio doesn’t tax Social Security retirement benefits. However, certain income from pensions or retirement accounts is taxed as regular income.
28. New Hampshire
Insider Monkey Score: 28
Cost of Living Index: 114.1
Tax Friendliness: Tax Friendly
New Hampshire is one of the states that won’t tax your retirement income. While the state doesn’t tax social security or other retirement income, dividends and interest are taxed for the current tax year and will be repealed for taxable periods beginning after December 31, 2024.
27. North Dakota
Insider Monkey Score: 28
Cost of Living Index: 94.6
Tax Friendliness: Moderately Tax Friendly
Beginning tax year 2021, North Dakota doesn’t tax Social Security retirement benefits.
26. New Jersey
Insider Monkey Score: 29
Cost of Living Index: 113.9
Tax Friendliness: Tax Friendly
The state of New Jersey does not tax Social Security retirement benefits, military pensions, or even railroad retirement benefits.
25. Virginia
Insider Monkey Score: 32
Cost of Living Index: 101.9
Tax Friendliness: Tax Friendly
Another state that won’t tax Social Security income in 2024 is Virginia. Other types of retirement income are deductible up to $12,000 for seniors.
24. Delaware
Insider Monkey Score: 33
Cost of Living Index: 101.1
Tax Friendliness: Tax Friendly
Delaware is considered a tax-friendly state partly because the state doesn’t have a sales tax. Moreover, Social Security income is fully exempt from state income taxes.
23. Nebraska
Insider Monkey Score: 33
Cost of Living Index: 90.9
Tax Friendliness: Moderately Tax Friendly
Starting in 2024, Nebraska no longer tax Social Security benefits. However, other types of retirement income are still taxed.
22. Indiana
Insider Monkey Score: 34
Cost of Living Index: 91
Tax Friendliness: Moderately Tax Friendly
Next on our list of states that won’t tax Social Security income in 2024 is Indiana. The state is moderately tax-friendly with a cost of living that is lower than the national average.
21. Idaho
Insider Monkey Score: 36
Cost of Living Index: 98.6
Tax Friendliness: Tax Friendly
Idaho doesn’t tax Social Security benefits either. However, other forms of retirement income are taxed.
20. Pennsylvania
Insider Monkey Score: 37
Cost of Living Index: 95.6
Tax Friendliness: Tax Friendly
Next on our list of states that won’t tax Social Security income in 2024 is Pennsylvania. The state of Pennsylvania is one of the best states for taxes and cost of living.
19. South Carolina
Insider Monkey Score: 38
Cost of Living Index: 95.3
Tax Friendliness: Tax Friendly
One of U-Haul's top growth states, South Carolina also doesn't tax Social Security benefits. There are exemptions on other types of retirement income as well.
18. Iowa
Insider Monkey Score: 39
Cost of Living Index: 90.3
Tax Friendliness: Moderately Tax Friendly
The state of Iowa no longer taxes retirement income for taxpayers 55 or older.
17. Alaska
Insider Monkey Score: 41
Cost of Living Index: 125.2
Tax Friendliness: Very Tax Friendly
The state of Alaska, one of the few states with no income or sales tax, also makes it to our list at number 17.
16. Missouri
Insider Monkey Score: 42
Cost of Living Index: 88.5
Tax Friendliness: Moderately Tax Friendly
Missouri is one of the top states that won’t tax Social Security income in 2024. The state eliminated the tax on all Social Security benefits, effective beginning with the 2024 tax year.
15. Texas
Insider Monkey Score: 43
Cost of Living Index: 92.7
Tax Friendliness: Tax Friendly
A popular state for retirees, Texas doesn’t have an income tax and also boasts a low cost of living.
14. Illinois
Insider Monkey Score: 46
Cost of Living Index: 92.1
Tax Friendliness: Tax Friendly
Illinois boasts a cost of living that is lower than the national average and is also tax-friendly for retirees. Social security benefits aren't taxed in the state. Pension distributions or retirement plan income, including from IRAs, 401(k) plans, and government retirement plans aren't taxed either.
13. Kentucky
Insider Monkey Score: 47
Cost of Living Index: 92
Tax Friendliness: Tax Friendly
Kentucky also fully exempts Social Security benefits from taxation at the state level, and other types of retirement income are provided significant deductions for seniors.
12. Louisiana
Insider Monkey Score: 48
Cost of Living Index: 91
Tax Friendliness: Tax Friendly
Louisiana does not tax Social Security benefits or income from public pensions, but retirees pay income taxes on income from retirement savings accounts. Although, there is an exemption available.
11. Nevada
Insider Monkey Score: 51
Cost of Living Index: 101
Tax Friendliness: Very Tax Friendly
A very tax-friendly state, Nevada doesn’t have a state income tax.
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Disclosure: none. 41 States That Won’t Tax Social Security Income in 2024 is originally published on Insider Monkey.