Tax & AccountingFebruary 18, 2021

2021 Review: How Do States Tax Retirement and Social Security Income?


2021 Review: How Do States Tax Retirement and Social Security Income?

How big of a bite will state taxes take out of your retirement and Social Security income? It depends on where you decide to retire.

Some states:

  • impose no income tax on retirement, pension, and other income;
  • exempt all or some retirement, pension, and Social Security income;
  • provide credits for retirement and pension income; or
  • tax all retirement and pension income.

What States Do Not Tax Retirement Income?

7 states do not tax individual retirement or other income.

Alaska Florida Nevada
South Dakota Texas Washington

2 states tax only dividend and interest income.

New Hampshire Tennessee

4 states exempt all or most retirement income.

Illinois Hawaii Mississippi

What States Tax Some Retirement Income?

21 states tax some, but not all, retirement or pension income. Many of these states limit the exemption amounts based on federal adjusted gross income (AGI) thresholds.

Alabama Arkansas Colorado
Connecticut Delaware Georgia
Iowa Kentucky Louisiana
Maine Maryland Michigan
Missouri Montana New Jersey
New York Oklahoma Rhode Island
South Carolina Virginia Wisconsin

3 states provide a credit for retirement or pension income.

Ohio Oregon Utah

What States Tax All or Most Private Retirement Income?

13 states and the District of Columbia tax all or most private retirement or pension income.

Arizona California Idaho
Indiana Kansas Massachusetts
Minnesota Nebraska New Mexico
North Carolina North Dakota Vermont
West Virginia

What States Tax Military Retirement Income?

5 states and the District of Columbia tax all or most military retirement income.

California New Mexico Utah
Vermont Virginia

Vermont’s governor proposed in his annual budget address to eliminate the tax on military pensions.

14 states tax some, but not all, military retirement income.

Arizona Colorado Delaware
Georgia Idaho Indiana
Kentucky Maryland Nebraska
North Carolina Oklahoma Oregon
Rhode Island South Carolina

Nebraska is increasing its military retirement income exclusion for tax years after 2021.

21 states exempt all military retirement income from taxation.

Alabama Arkansas Connecticut
Hawaii Illinois Iowa
Kansas Louisiana Maine
Massachusetts Michigan Minnesota
Mississippi Missouri New Jersey
New York North Dakota Ohio
Pennsylvania West Virginia Wisconsin

What States Tax Social Security Income?

13 states tax some or all Social Security income. Most of these states exempt a part of this income based on AGI thresholds.

Colorado Connecticut Kansas
Minnesota Missouri Montana
Nebraska New Mexico North Dakota
Rhode Island Utah Vermont
West Virginia

The Utah governor’s 2022 budget includes a proposal to create a Social Security tax credit for low and middle income seniors.

By Tim Bjur, J.D.

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