When planning for retirement, one key consideration is how your Social Security income will be taxed. In some states, Social Security benefits are subject to state income tax, while in others, they are fully exempt.
If you want to ensure that your hard-earned benefits stay intact, it’s important to be aware of the states that impose taxes on Social Security income—and avoid them when choosing where to retire.
Here’s a list of states where your Social Security benefits may be taxed, and why you might want to skip them if you want to keep those benefits in your pocket:
California
While California does not tax Social Security benefits on the federal level, it does tax them at the state level. The state’s income tax rates can be steep, so if you want to keep your Social Security income free from taxation, California is one to skip.
Minnesota
Minnesota taxes Social Security income, but the amount depends on your income level. Higher earners will find a larger portion of their benefits taxed, so if you’re trying to keep your Social Security benefits untaxed, Minnesota might not be the best choice.
Nebraska
Nebraska fully taxes Social Security income for individuals with higher income. The state offers exemptions based on income, but if you have a substantial retirement income, you’ll be paying state taxes on your Social Security benefits.
Montana
Montana taxes Social Security income as well, and the taxability depends on the filer’s income. The state provides a partial exemption for lower-income retirees, but higher-income individuals will face taxes on their benefits.
Kansas
Kansas imposes taxes on Social Security income, but retirees can expect partial exemptions based on income. While lower earners can avoid the tax, those with higher retirement income will be taxed on a portion of their Social Security benefits.
Vermont
Vermont taxes Social Security benefits for individuals whose income exceeds a certain threshold. If your retirement income is on the higher end, be prepared to pay taxes on your Social Security checks.
Connecticut
Connecticut taxes Social Security benefits, but with certain income thresholds. For higher earners, most of your Social Security benefits will be taxed, making it less than ideal for retirees looking to protect their income.
New Mexico
New Mexico also taxes Social Security benefits, though they provide exemptions for lower-income individuals. High earners, however, will see their Social Security benefits taxed.
