Social Security benefits provide important income to millions of retirees and disabled Americans, but tax rules can vary widely depending on where you live. While the federal government may tax benefits once income exceeds a certain threshold, only a few states continue to tax them social Security State-level revenue.
Understanding these rules can help retirees plan their finances and avoid unexpected deductions.
According to USA Today, most states do not tax Social Security benefits, but nine states will continue to tax them in the 2025 tax year. Changes are already underway: nebraska The tax will be eliminated in 2025, and West Virginia is phasing out the tax with plans for full elimination in 2026.
Also read: Want to live like a millionaire when you retire? Check out these 10 affordable U.S. towns
Residents under 65 can exclude the first $20,000 of benefits, while residents 65 and older are exempt entirely. Starting in 2025, residents ages 55-64 can deduct up to $24,000.
Benefit exemptions are available for single filers earning less than $75,000 and joint filers earning less than $100,000. Above these levels, up to 25% of benefits may be taxed.
Benefits may be partially or fully exempt, with exemptions gradually phased out as income levels increase.
The taxable amount depends on adjusted gross income.
Most recipients avoid taxes. Single filers making less than $100,000 and joint filers making less than $150,000 qualify for the exemption.
The exemption disappears if income exceeds $107,000 for single filers, $133,750 for joint filers, or if the filer has not yet reached the full amount retire age.
Benefits may be taxed above certain income thresholds, but a nonrefundable credit may offset some liability.
Full exemption is available below certain income limits; taxes increase as income increases.
By 2025, taxpayers can deduct 65% of Social Security benefits from taxable income, with broader exemptions planned before the tax is eliminated in 2026.
Even if your state doesn’t tax Social Security, federal taxes may apply if your combined income exceeds set limits. This applies to retirement benefits, survivor benefits, and disability benefits.
Also read: What happens when you file for Social Security at age 67? Maximum benefit explained
Experts recommend reviewing state income thresholds and planning withdrawals carefully.
Some retirees delay taking benefits to increase payments and potentially reduce taxes. Each January, beneficiaries receive form SSA-1099 from the Social Security Administration, which lists benefit totals and helps determine tax liability.
Knowing whether your state taxes Social Security benefits can help you predict deductions and make informed retirement planning decisions.
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