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Key Takeaways:
- Some states with income tax consider Social Security benefits income, opening them up to being taxed.
- States without income tax do not tax Social Security benefits, of course. There are also several states that don't count Social Security benefits as income in their state tax code.
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Many people don't know that their Social Security benefits can be taxed in many states after retirement. Because Social Security benefits are counted as "income" in these states, they can be taxed just like any other income.
That said, not all states choose to tax these benefits at a state level.
We'll look at the ten largest states that do not tax Social Security benefits as part of their state income tax laws. Many retirees move to these states to keep more of their benefits.
This list starts at the smallest state and moves up from there, so you'll find the largest state at the end!
10. North Carolina
North Carolina is a commonly overlooked retirement destination.
Many people don't imagine North Carolina as a retirement destination, but it's full of beautiful mountains and forests. Plus, they don't consider Social Security benefits as taxable income. The state is particularly known for its affordable housing, which can stretch retirement benefits even further.
The state does have property taxes in many areas, but these vary from location to location.
Retirees who like the outdoors and want to go hiking or fishing may particularly love retiring to North Carolina. '
9. Georgia
Georgia is a great state for those who prefer a more mild climate.
Georgia may be best known for its peaches, but it's also growing as a retirement state. It offers a warm climate and affordable living costs. The state varies quite a bit, too, so many retirees can find somewhere they fit in.
Like many states on this list, Georgia does not have an income tax, which is why Social Security benefits aren't taxed. However, many areas do have property taxes you'll need to keep in mind.
8. Michigan
Michigan is a great state for retirees who love to be outdoors.
Michigan may not be as warm as Georgia or North Carolina, but it does offer beautiful beaches. Like many states we've discussed, it's also inexpensive to live in most areas. Expect affordable housing and a strong economy in most Michigan communities.
The state has no income tax, which allows you to keep more of your retirement income in your pocket.
7. Ohio
Ohio may not have the mildest climate, but it's low-cost-of-living often makes up for it!
Ohio offers a good balance of affordability and quality of life to retirees. The state offers a huge range of landscapes, including cities and rural areas. Many retirees can find somewhere they enjoy living.
The state has some very beautiful areas, and housing in most communities is affordable. There is absolutely no state income tax, which helps keep your tax burden low.
6. Illinois
Illinois offers both rural and urban living.
Illinois has a diverse landscape that's suitable for nearly any retiree. It's particularly home to world-class museums and outdoor opportunities, like hiking and boating. Because the state doesn't have an income tax, it doesn't tax Social Security benefits.
However, the state does have property and sales taxes, which can contribute significantly to the overall cost of living.
5. Pennsylvania
This state doesn't have an income tax at all, significantly decreasing resident's tax burden.
Pennsylvania is a truly diverse state, with landscapes ranging from mountains to farmland. The state prides itself on its rich history and has plenty of beautiful wildlife areas for retirees interested in hiking and fishing.
There is no state income tax, but property taxes exist in most areas.
4. New York
New York has a very high cost of living.
New York may be best known for the bustling streets of Manhattan, but you can't forget about the more peaceful landscapes of the Adirondacks. While most retirees don't want to spend their retirement in New York City, there are plenty of other places in the state to retire.
That said, New York is also known for its relatively high cost of living, though you get to enjoy Broadway shows, museums, and professional sports. The state also has property taxes and sales taxes, which add to your tax burden.
3. Florida
Florida is a very popular retirement destination.
Florida has come to be synonymous with retirement, and part of that rise to fame is because the state does not have a state income tax. It's warm climate and numerous golf courses absolutely help, though!
However, property taxes can be quite high in some areas, especially near the coast. Retirees will need to factor these in.
2. Texas
Texas is slowly becoming a more popular retirement destination thanks to its lower cost of living.
Texas is an increasingly popular destination for retirees due to its low cost of living and mild climate. The state also has plenty of outdoor opportunities, including fishing, hiking, and camping. The state's tax burden is surprisingly low, too. It has no income tax, and property taxes tend to be quite low in most areas.
Texas's economy is growing, too, providing opportunities in the job market for retirees looking for part-time work.
1. California
California has a higher cost of living than most states, but it does not tax Social Security benefits.
It may surprise you to find out that California does not tax Social Security benefits. However, the state has relatively high property and sales taxes, especially in metropolitan areas. The state's overall cost of living is quite high, which keeps it from being a popular state to retire.
That said, the state does have world-class museums and national parks. Most areas have a diverse culture, and the cost of living drops substantially outside of urban centers.
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