Key Points
- Eight states still tax Social Security benefits in 2026, with some offering tax breaks based on income or age.
- The federal government can tax part of Social Security benefits if income exceeds certain limits, affecting over half of beneficiaries.
- Retirees can lower their tax bill by spreading out retirement withdrawals, drawing from a Roth IRA, and taking advantage of tax breaks.
State Taxes on Social Security Benefits
Most states don't tax Social Security benefits, but eight states still impose taxes on these benefits. Understanding the tax rules at both the state and federal levels can help retirees minimize their tax burden.
At the federal level, the government can tax part of Social Security benefits if income exceeds certain limits, affecting over half of beneficiaries. The tax threshold varies based on filing status, with married filing separately having a $25,000 threshold and single filers having a $100,000 threshold.
States that tax Social Security benefits offer exemptions or tax breaks based on income or age, with some states exempting benefits entirely. For example, New Mexico exempts Social Security benefits from state income taxes if adjusted gross income is $100,000 or less as a single filer, or $150,000 or less if married filing jointly.
At a Glance
| Main States Taxing Social Security Benefits | New Mexico, Alaska, Hawaii, Massachusetts, New York, South Dakota Exemptions or tax breaks may apply based on income or age |
| Federal Tax Threshold | $25,000 For married filing separately, with $100,000 threshold for single filers |
| New Federal Senior Deduction | $6,000 per person Available through 2028, phases out at $75,000 for individual filers or $150,000 for joint filers |
Behind the Numbers: Federal and State Tax Implications
Behind the Numbers: Federal and State Tax Implications
The federal government's tax threshold for Social Security benefits is based on combined income, which includes income from pensions, retirement accounts, and other sources. The tax threshold varies based on filing status, with married filing separately having a $25,000 threshold and single filers having a $100,000 threshold.
States that tax Social Security benefits offer exemptions or tax breaks based on income or age, with some states exempting benefits entirely. For example, New Mexico exempts Social Security benefits from state income taxes if adjusted gross income is $100,000 or less as a single filer, or $150,000 or less if married filing jointly.
The new federal senior deduction, worth up to $6,000 per person, phases out at $75,000 for individual filers or $150,000 for joint filers. This deduction can help lower the tax bill for retirees, but it's essential to consider the tax implications of drawing from a Roth IRA, selling stocks or other investments, and taking advantage of tax breaks.
Strategies to Minimize Tax Burden on Social Security Benefits
Strategies to Minimize Tax Burden on Social Security Benefits
- Be strategic about retirement withdrawals: Spreading out withdrawals over several years can help lower your tax bill.
- Draw from a Roth IRA: Qualified Roth IRA withdrawals don't count toward the income used to determine whether your Social Security benefits are taxable.
- Watch your investment income: Selling stocks or other investments for a profit in a brokerage account can increase your taxable income, which could also make more of your Social Security benefits taxable.
- Take advantage of tax breaks: If you're 65 or older, you may qualify for the new federal senior tax deduction. Many states also offer exemptions or tax credits that can reduce what you owe on your benefits.
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