12 States That Tax Social Security Benefits
You may have dreamed of a tax-free retirement, but if you live in one of these states, your Social Security benefits may be subject to state taxes.
Are Social Security benefits taxable? You can bet your bottom dollar they are – at least by the federal government, which taxes up to 85% of your benefits, depending on your income. But what about state taxes on Social Security? Unfortunately, a dozen states can tack on additional taxes of their own.
States have different ways of taxing Social Security, too. For example, New Mexico treats Social Security benefits the same way as the feds. But other states tax Social Security benefits only if income exceeds a specified threshold amount. For example, Missouri taxes Social Security benefits only if your income tops $85,000, or $100,000 for married couples. Then there's Utah, which includes Social Security benefits in taxable income, but starting in 2021 allows a tax credit for a portion of the benefits subject to tax. Other states have different methods of taxing your Social Security check.
Also remember that a tax on Social Security doesn't necessarily mean a state is unsuitable for retirement. Colorado, one of the states that taxes at least some Social Security benefits, actually ranks as one of the 10 most tax-friendly state for retirees. That's why it's best to weigh all state taxes when researching the best places to retire. And our list of the 12 states that tax Social Security benefits will help you do just that. For each state, we provide information on the state's sales tax, property tax, and any death taxes. We've also included a link to the state's page in our State-by-State Guide to Taxes on Retirees, where you can find additional information about taxes on seniors.
The state-by-state guide to taxes on retirees is updated annually based on information from state tax departments, the Tax Foundation, and the U.S. Census Bureau. Income tax rates and thresholds are for the 2021 tax year unless otherwise noted.
Colorado
State Taxes on Social Security: For beneficiaries younger than 65, up to $20,000 of Social Security benefits can be excluded, along with other retirement income. Those 65 and older can exclude benefits and other retirement income up to $24,000. Also, Social Security income not taxed by the federal government is not added back to adjusted gross income for state income tax purposes.
Note that, beginning in 2022, the $24,000 cap is removed for federally taxable Social Security benefits, which effectively makes all federally taxed Social Security income deductible for taxpayers 65 and over.
Sales Tax: 2.9% state levy. Localities can add as much as 8.3%, and the average combined rate is 7.72%, according to the Tax Foundation.
- Groceries: Exempt
- Clothing: Taxable
- Motor Vehicles: Taxable
- Prescription Drugs: Exempt
Income Tax Range: For 2021, Colorado has a flat income tax rate of 4.5%. The rate was reduced from 4.63% to 4.55% with the approval of Proposition 116, which appeared on the November 2020 ballot. The rate for 2021 was then lowered to 4.5% because of a high fiscal year revenue growth rate. Denver and a few other cities in Colorado also impose a monthly payroll tax.
Property Taxes: In Colorado, the median property tax rate is $494 per $100,000 of assessed home value.
Inheritance and Estate Taxes: There is no inheritance tax or estate tax.
For details on tax breaks for retirees and state taxes on other retirement income, see the complete guide to taxes on retirees in Colorado.
Connecticut
State Taxes on Social Security: Social Security income is fully exempt for single taxpayers with federal adjusted gross income of less than $75,000 and for married taxpayers filing jointly with federal AGI of less than $100,000. Taxpayers who exceed these thresholds can still deduct 75% of their federally taxable Social Security benefits on their Connecticut tax return.
Sales Tax: The state taxes most items at 6.35%, and localities are not allowed to add to that.
- Groceries: Exempt.
- Clothing: Taxable (6.35% for items under $1,000; 7.75% for items over $1,000; items costing less then $50 are fully exempt)
- Motor Vehicles: Taxable (6.35% for vehicles under $50,000; 7.75% for vehicles over $50,000; 4.5% for non-resident military personnel on full-time active duty in the state)
- Prescription Drugs: Exempt.
Income Tax Range: Low: 3% (on up to $20,000 of taxable income for married joint filers and up to $10,000 for those filing individually). High: 6.99% (on the amount over $1 million for married joint filers and over $500,000 for those filing individually).
Property Taxes: In Connecticut, the median property tax rate is $2,139 per $100,000 of assessed home value.
Inheritance and Estate Taxes: Connecticut has an estate tax with a $7.1 million exclusion for 2021 ($9.1 million in 2022). The tax due is limited to $15 million. Connecticut is the only state with a gift tax on assets you give away while you're alive. If you made taxable gifts during the year, state law requires that you file a Connecticut estate and gift tax return to identify such gifts. However, taxes are due in 2021 only when the aggregate value of gifts made since 2005 exceeds $7.1 million ($9.1 million in 2022). Estate and gift tax rates for 2021 range from 10.8% to 12% (11.6% or 12% in 2022).
For details on tax breaks for retirees and state taxes on other retirement income, see the complete guide to taxes on retirees in Connecticut.
Kansas
State Taxes on Social Security: Social Security benefits are exempt from Kansas income tax for residents with a federal adjusted gross income of $75,000 or less. For taxpayers with a federal AGI above $75,000, Social Security benefits are taxed by Kansas to the same extent they are taxed at the federal level.
Sales Tax: 6.5% state levy. Localities can add as much as 4%, and the average combined rate is 8.7%, according to the Tax Foundation.
- Groceries: Taxable
- Clothing: Taxable
- Motor Vehicles: Taxable
- Prescription Drugs: Taxable
Income Tax Range: Low: 3.1% (on $2,501 to $15,000 of taxable income for single filers and $5,001 to $30,000 for joint filers). High: 5.7% (on more than $30,000 of taxable income for single filers and more than $60,000 for joint filers). Kansas also has an "intangibles tax" levied on unearned income by some localities.
Property Taxes: In Kansas, the median property tax rate is $1,369 per $100,000 of assessed home value.
Inheritance and Estate Taxes: There is no estate tax or inheritance tax.
For details on tax breaks for retirees and state taxes on other retirement income, see the complete guide to taxes on retirees in Kansas.
Minnesota
State Taxes on Social Security: Social Security benefits are taxable in Minnesota, but for 2021 a married couple filing a joint return can deduct up to $5,290 of their federally taxable Social Security benefits from their state income. The 2021 tax break can be as much as $4,130 for single and head-of-household filers, and up to $2,645 for married taxpayers filing separate returns. The deduction is phased out for married couples with more than $80,270 of provisional income (it's reduced to zero for couples with more than $106,720 of provisional income). The phase-out range for single and head of household filers is $62,710 to $83,360. For married taxpayers filing separate returns, the phase-out range is $40,135 to $53,360.
Sales Tax: 6.875% state levy. Localities can add as much as 2%, with an average combined rate of 7.47%, according to the Tax Foundation.
- Groceries: Exempt
- Clothing: Exempt
- Motor Vehicles: Exempt from ordinary sales tax, but taxable under special 6.5% excise tax ($10 for certain older vehicles; $150 for certain collector vehicles)
- Prescription Drugs: Exempt
Income Tax Range: Low: 5.35% (on less than $27,230 of taxable income for single filers and on less than $39,810 for joint filers). High: 9.85% (on more than $166,040 of taxable income for single filers and on more than $276,200 for joint filers).
Property Taxes: In Minnesota, the median property tax rate is $1,082 per $100,000 of assessed home value.
Inheritance and Estate Taxes: Minnesota’s estate tax exemption is $3 million, but the state looks back to include any taxable gifts made within three years prior to death as part of your estate. Tax rates range from 13% to 16%.
For details on tax breaks for retirees and state taxes on other retirement income, see the complete guide to taxes on retirees in Minnesota.
Missouri
State Taxes on Social Security: Social Security benefits are not taxed for married couples with a federal adjusted gross income less than $100,000 and single taxpayers with an AGI of less than $85,000. Taxpayers who exceed those income limits may qualify for a partial exemption on their benefits.
Sales Tax: 4.225% state levy. Localities can add as much as 5.763%, and the average combined rate is 8.25%, according to the Tax Foundation.
- Groceries: Taxable (1.225% state rate; additional local taxes may apply)
- Clothing: Taxable
- Motor Vehicles: Taxable
- Prescription Drugs: Exempt.
Income Tax Range: Low: 1.5% (on taxable of income from $108 to $1,088). High: 5.4% (on more than $8,704 of taxable income). Kansas City and St. Louis have an earnings tax of 1 percent.
Property Taxes: In Missouri, the median property tax rate is $930 per $100,000 of assessed home value.
Inheritance and Estate Taxes: There is no inheritance tax or estate tax.
For details on tax breaks for retirees and state taxes on other retirement income, see the complete guide to taxes on retirees in Missouri.
Montana
State Taxes on Social Security: Social Security benefits are taxable. The method used to calculate the taxable amount for Montana income tax purposes is similar to the method used for federal returns. However, there are important differences. As a result, the Montana taxable amount may be different than the federal taxable amount. (Beginning in 2024, Social Security benefits will be taxed by Montana to the same extent they are taxed at the federal level.)
Sales Tax: No state sales tax. Resort areas such as Big Sky, Red Lodge and West Yellowstone have local sales taxes.
Income Tax Range: Low: 1% (on up to $3,100 of taxable income). High: 6.9% (on taxable income over $18,800).
Starting in 2022, the top rate will be 6.75% on taxable income over $17,400. Then, beginning in 2024, the income tax rates and brackets will be substantially revised (there will only be two rates – 4.7% and 6.5%).
Property Taxes: In Montana, the median property tax rate is $831 per $100,000 of assessed home value.
Inheritance and Estate Taxes: There is no inheritance tax or estate tax.
For details on tax breaks for retirees and state taxes on other retirement income, see the complete guide to taxes on retirees in Montana.
Nebraska
State Taxes on Social Security: For 2021, Social Security benefits are not taxed for joint filers with a federal adjusted gross income of $59,960 or less and other taxpayers with a federal AGI of $44,460 or less. For taxpayers exceeding these thresholds, Social Security benefits are taxed by Nebraska to the same extent they are taxed at the federal level.
For 2021, taxpayers can chose to deduct 5% of Social Security benefits included in federal AGI instead of following the rules above. The optional deduction percentage increases to 20% for 2022, 30% for 2023, 40% for 2024, and 50% for 2025 and thereafter. (Note: The state legislature intends to enact future legislation that would increase the percentage to 60% for 2026, 70% for 2027, 80% for 2028, 90% for 2029, and 100% for 2030 and beyond.)
Sales Tax: 5.5% state levy. Localities can add as much as 2.5%, and the average combined rate is 6.94%, according to the Tax Foundation.
- Groceries: Exempt
- Clothing: Taxable
- Motor Vehicles: Taxable
- Prescription Drugs: Exempt
Income Tax Range: Low: 2.46% (on up to $3,340 of taxable income for single filers and $6,660 for married couples filing jointly). High: 6.84% (on taxable income over $32,210 for single filers and $64,430 for married couples filing jointly).
Property Taxes: In Nebraska, the median property tax rate is $1,614 per $100,000 of assessed home value.
Inheritance and Estate Taxes: With Nebraska's inheritance tax, the closer the heir's relationship to the decedent, the smaller the tax rate and the greater the exemption (surviving spouses are exempt from the tax). For example, the tax on heirs who are immediate relatives (e.g., parents, grandparents, siblings, children and other lineal descendants) is only 1% and does not apply to property that is worth less than $40,000. For remote relatives (e.g., uncles, aunts, nieces, nephews), the tax rate is 13% and the exemption amount is $15,000. For all other heirs, the tax is imposed at an 18% rate on property worth $10,000 or more.
For details on tax breaks for retirees and state taxes on other retirement income, see the complete guide to taxes on retirees in Nebraska.
New Mexico
State Taxes on Social Security: Social Security benefits are taxed to the same extent they are taxed at the federal level.
Sales Tax: 5.125% state levy. Localities can add as much as 4.313%, and the average combined rate is 7.84%, according to the Tax Foundation. New Mexico's tax is a gross receipts tax that covers most services.
- Groceries: Exempt
- Clothing: Taxable
- Motor Vehicles: Exempt from ordinary sales tax, but taxable under special 4% excise tax
- Prescription Drugs: Exempt
Income Tax Range: Low: 1.7% (on up to $5,500 of taxable income for single filers and $8,000 for joint filers). High: 5.9% (on taxable income over $210,000 for single filers and over $315,000 for married couples filing jointly).
Property Taxes: In New Mexico, the median property tax rate is $776 per $100,000 of assessed home value.
Inheritance and Estate Taxes: There is no inheritance tax or estate tax.
For details on tax breaks for retirees and state taxes on other retirement income, see the complete guide to taxes on retirees in New Mexico.
Rhode Island
State Taxes on Social Security: For 2021, Social Security benefits are not taxed for joint filers with a federal adjusted gross income of $111,200 or less, single and head-of-household filers with federal AGI of $88,950 or less, and married taxpayers filing a separate return with a federal AGI of $88,975 or less. For taxpayers exceeding these thresholds, Social Security benefits are taxed by Rhode Island to the same extent they are taxed at the federal level.
Sales Tax: 7% state levy. No local taxes.
- Groceries: Exempt
- Clothing: Exempt if under $250
- Motor Vehicles: Taxable
- Prescription Drugs: Exempt
Income Tax Range: Low: 3.75% (on up to $66,200 of taxable income). High: 5.99% (on taxable income over $150,550).
Property Taxes: In Rhode Island, the median property tax rate is $1,533 per $100,000 of assessed home value.
Inheritance and Estate Taxes: Rhode Island has an estate tax with a 2021 exemption amount of $1,595,156 ($1,654,688 for 2022). Rates range from 0.8% to 16%.
For details on tax breaks for retirees and state taxes on other retirement income, see the complete guide to taxes on retirees in Rhode Island.
Utah
State Taxes on Social Security: Social Security benefits are included in Utah taxable income to the same extent they're taxed at the federal level. However, beginning in 2021, a nonrefundable tax credit is available for Social Security benefits. The credit is calculated by multiplying the Utah income tax rate (currently 4.95%) by the amount of Social Security benefits included in federal adjusted gross income (AGI). The total credit amount is reduced by $.025 for each dollar by which the taxpayer's modified AGI exceeds $25,000 for a married person filing a separate tax return, $30,000 for a single filer, and $50,000 for a married couple filing a joint return or a head-of-household filer. Taxpayers can't claim both the Social Security credit and the general $450 credit for retirees.
Sales Tax: State levy is 4.85%, but mandatory 1% local sales tax and 0.25% county option sales tax are added to the state tax (for a 6.1% total rate). Plus, localities can add up to an additional 2.95%, making the average combined state and local rate 7.19%, according to the Tax Foundation.
- Groceries: Taxable (1.75% state tax, plus mandatory 1.25% in local and county taxes)
- Clothing: Taxable
- Motor Vehicles: Taxable
- Prescription Drugs: Exempt
Income Tax Range: Utah has a flat tax of 4.95%.
Property Taxes: In Utah, the median property tax rate is $575 per $100,000 of assessed home value.
Inheritance and Estate Taxes: There is no inheritance tax or estate tax.
For details on tax breaks for retirees and state taxes on other retirement income, see the complete guide to taxes on retirees in Utah.
Vermont
State Taxes on Social Security: Social Security benefits are not taxed for joint filers with a federal adjusted gross income of $60,000 or less and other taxpayers with a federal AGI of $45,000 or less. Taxpayers who exceed those income limits may qualify for a partial exemption on their benefits.
Sales Tax: 6% state levy. Municipalities can add 1% to that, but the average combined rate is 6.24%.
- Groceries: Exempt
- Clothing: Exempt
- Motor Vehicles: Exempt from ordinary sales tax, but taxable under special 6% purchase and use tax
- Prescription Drugs: Exempt
Income Tax Range: Low: 3.35% (on up to $40,950 of taxable income for singles and up to $68,400 for joint filers). High: 8.75% (on taxable income over for $206,950 for singles and up to $251,950 for joint filers).
Property Taxes: In Vermont, the median property tax rate is $1,861 per $100,000 of assessed home value.
Inheritance and Estate Taxes: Vermont has an estate tax with an exemption of $5 million for 2021. The tax rate is a flat 16%.
For details on tax breaks for retirees and state taxes on other retirement income, see the complete guide to taxes on retirees in Vermont.
West Virginia
State Taxes on Social Security: In 2021, 65% of Social Security benefits taxed by the federal government are excluded from taxable income for single taxpayers with federal adjusted gross income of $50,000 or less ($100,000 or less for joint filers). Beginning in 2022, qualifying taxpayers can exclude all Social Security benefits.
Sales Tax: 6% state levy. Municipalities can add up to 1% to that, with an average combined rate of 6.51%, according to the Tax Foundation.
- Groceries: Exempt
- Clothing: Taxable
- Motor Vehicles: Taxable
- Prescription Drugs: Exempt
Income Tax Range: Low: 3% (on up to $10,000 of taxable income). High: 6.5% (on taxable income of $60,000 or more).
Property Taxes: In West Virginia, the median property tax rate is $571 per $100,000 of assessed home value.
Inheritance and Estate Taxes: There is no inheritance tax or estate tax.
For details on tax breaks for retirees and state taxes on other retirement income, see the complete guide to taxes on retirees in West Virginia.
