You’ve worked hard all your life, but now it’s time (or almost time) to retire. One of your greatest fears is not having enough money to make ends meet in your golden years. If you don’t have a pension, and your 401(k) or IRA accounts are a bit light, you might have to rely more heavily on your Social Security benefits than you had hoped. So any taxes on your Social Security can be a difficult pill to swallow.
At the federal level, wealthier retirees can have up to 85% of their Social Security benefits taxed. Thankfully, Uncle Sam doesn’t tax that much of everyone’s benefits. In fact, depending on your income, you might not have to pay any federal income tax on your Social Security payments.
But here’s something a lot of people don’t realize (or plan for)—your state might tax your Social Security benefits, too. As it stands right now, 10 states will tax Social Security benefits to one extent or another in 2024. That’s the bad news.
The good news is that states are trending away from taxes on Social Security benefits. In fact, two states completely eliminated their tax on Social Security benefits starting in 2024. Keep reading to see if your state is one of them.
Related: What Tax Bracket Are You In?
Missouri Completely Exempts Social Security Benefits In 2024
In July 2023, Missouri Gov. Mike Parson signed legislation that completely exempts Social Security benefits from the Show Me State’s income tax, regardless of the taxpayer’s filing status or income. That law went into effect on Jan. 1, 2024.
However, the old rules still apply for Social Security benefits received last year when you file your 2023 Missouri income tax return, which is due April 15, 2024. Under the law in effect for the 2023 tax year, a complete exemption is only available to retirees with a Missouri adjusted gross income (AGI) of:
- $85,000 or less for taxpayers using the single, head of household, married filing separate, or qualifying widow(er) filing status
- $100,000 or less for taxpayers using the married filing combined filing status
If your 2023 Missouri AGI is above the applicable threshold, some or all of your Social Security benefits taxed by the federal government will also be taxed by Missouri. You can receive a partial exemption on your 2023 return, but it’s reduced on a dollar-for-dollar basis if your Missouri AGI is more than the $85,000 or $100,000 threshold.
Related: What’s Your Standard Deduction?
Nebraska Eliminates Its Tax on Social Security In 2024
The Cornhusker State also helped retirees when Gov. Jim Pillen signed legislation in May 2023 that axed Nebraska’s tax on Social Security benefits. As with the Missouri law, it took effect on Jan. 1, 2024.
However, seniors still might owe tax on their Social Security income reported on their 2023 Nebraska tax return that must be filled by April 15, 2024. Under the old rules in place for the 2023 tax year, Nebraska could tax part of your Social Security income if your federal AGI is above either:
- $66,510 for married couples filing a joint Nebraska tax return
- $49,310 for all other Nebraska taxpayers
If your 2023 federal AGI exceeds the applicable threshold, Nebraska will tax 40% of any Social Security benefits that are taxed at the federal level.
You’re off the hook if your 2023 federal AGI is equal to or less than the applicable $66,510 or $49,310 threshold. In that case, Nebraska won’t touch any of your 2023 Social Security income.
10 Other States Still Tax Social Security Benefits
Many seniors in Missouri and Nebraska will save hundreds of dollars each year thanks to the repeal of state taxes on Social Security benefits. That’s great news for them.
Unfortunately, however, Social Security benefits are still taxed to one extent or another in the following 10 states:
- New Mexico
- Rhode Island
- West Virginia
(See States That Tax Social Security Benefits for details.)
In some of these states, there have been recent efforts to get taxes on Social Security payments off the books—but lawmakers just couldn’t get it done. As noted earlier, the trend is definitely toward fewer state taxes on Social Security income, so maybe there’s still hope for retirees in those states.