Which states tax Social Security income for retirees? A new report breaks it down for each state in the country.
According to the Tax Foundation, 37 states either do not have a state income tax or exclude Social Security benefits from their calculations on what constitutes taxable income.
New Mexico and Montana are two states that potentially tax Social Security payments. The Tax Foundation says that New Mexico offers a deduction that reduces the taxability of all retirement income, including Social Security. Montana directs residents to fill out a worksheet that will determine the taxable amount of a resident’s Social Security income.
There are 9 other states that reduce the amount of taxes on Social Security benefits based on criteria such as age or one’s level of income, so retirees in these states could potentially face Social Security taxes depending on their overall financial situation:
- North Dakota
- Rhode Island
The Tax Foundation’s report includes additional details about which states might be more likely to pose a tax threat to a retiree’s Social Security.
Some retirees choose to relocate to another state after retirement, often seeking benefits such as better weather, lower cost of living, or lower taxes on retirement income. Taxes are certainly one factor that shouldn’t be overlooked for federal retirees who are considering relocating.
For additional information about taxes on Social Security, be sure to see these other articles: