Avoid Social Security Tax in Florida: 9 States Will Tax Your Benefits, Here’s the List!

When most people think about retiring, Florida is often at the top of the list of ideal destinations. Known for its year-round warmth, sandy beaches, and many attractions, it’s easy to see why.

But there’s another major benefit that makes Florida stand out as a retirement hotspot: the state doesn’t tax Social Security benefits.

While federal income tax on Social Security benefits has been mandatory since 1983, there are still states that take a portion of your Social Security benefits as part of their state tax.

These taxes can vary from state to state, and for retirees, they may impact their retirement plans. The good news is that Florida is one of the lucky states where Social Security benefits are not taxed by the state government. But, unfortunately, that’s not the case for everyone.

If you’re planning to retire in a state where Social Security benefits are taxed, it’s important to know which states still impose taxes on these funds.

There are currently nine states that tax Social Security benefits and the rates can range from a small percentage to higher rates depending on the state and your income.

Here are the nine states that tax Social Security benefits, along with details on how the tax rules work for seniors in each state.

1. Colorado

While Colorado is known for its stunning natural beauty and outdoor activities, its state income tax rate is 4.4%.

However, starting in 2025, seniors aged 65 and older will be exempt from paying state taxes on their Social Security benefits. For those under 65, state taxes will apply, but if your income is $75,000 or less as an individual (or $95,000 or less as a couple), you’ll be exempt as well.

2. Connecticut

Connecticut’s state tax rate ranges from 2% to 6.99%, but there’s good news for retirees. If you’re an individual earning $75,000 or less (or $100,000 for couples), you can deduct your Social Security benefits from state taxes entirely.

Even if you earn more, you can still deduct a portion of your Social Security benefits, with a cap that taxes only 25% of your benefits.

3. Minnesota

Minnesota taxes Social Security benefits at rates between 5.35% and 9.85%, depending on your income.

However, if your income is below $82,190 as an individual (or $105,380 as a couple), you can subtract your Social Security benefits from state taxes. Higher earners may still qualify for a partial tax break.

4. Montana

While Montana offers scenic beauty and outdoor opportunities, it’s not the most tax-friendly state for retirees. Social Security benefits are exempt from taxes only if your annual income is under $25,000 (single) or $32,000 (married).

If you earn more, you can still get a deduction, but only a small portion of your benefits will be tax-free. Montana’s tax rate ranges from 4.7% to 5.9%.

5. New Mexico

New Mexico has a lower state tax rate, ranging from 1.7% to 5.9%. However, the state offers a generous tax exemption for Social Security benefits.

Single filers can earn up to $100,000, and joint filers can earn up to $150,000 without paying taxes on their Social Security benefits.

6. Rhode Island

Rhode Island, the smallest state in the U.S., offers some relief for retirees. Although its tax rates range from 3.75% to 5.99%, you won’t pay taxes on Social Security benefits unless you earn over $101,000 as a single filer or $126,250 as a couple.

7. Utah

Utah is famous for its national parks, but it also comes with a state income tax of 4.55%.

To avoid paying state taxes on Social Security, single retirees need to earn less than $45,000, and couples need to earn less than $75,000. Higher earners can still qualify for a partial exemption.

8. Vermont

Vermont’s tax rate ranges from 3.35% to 8.75%, and it’s one of the states where you may have to pay taxes on Social Security benefits.

However, if your income is below $50,000 as a single filer (or $65,000 for couples), you won’t owe any tax on your Social Security.

9. West Virginia

West Virginia is in the process of phasing out its tax on Social Security benefits. Currently, residents can deduct 35% of their benefits from state taxes, but starting in 2025, this will increase to 65%.

By 2026, West Virginia will no longer tax Social Security benefits at all.

States That Don’t Tax Social Security Benefits

If you’re looking to retire without the burden of state taxes on Social Security benefits, you’re in luck. Florida, along with 40 other states, does not tax Social Security benefits.

Other states that don’t tax Social Security include Texas, Nevada, and Alaska, to name a few. Washington, DC, also exempts Social Security benefits from state taxes.

Final Thoughts

Retirees should keep in mind that Social Security taxes are just one factor when choosing a retirement destination. Other factors such as property taxes, sales tax, and general living costs should also be considered when deciding on a retirement location.

While Florida is an attractive choice due to its lack of Social Security taxes, each state has its unique benefits and challenges, and it’s important to consider all aspects before making a final decision.

If you’re planning to retire soon, it’s worth keeping an eye on changes in tax policies, like the updates coming in Colorado and West Virginia, to make sure you’re making the best choice for your financial situation.

And remember, in addition to tax laws, factors like healthcare, housing prices, and community resources will also play a role in ensuring a comfortable retirement.