The untaxed social benefits have been consolidated after the pandemic, especially with the Biden administration’s tax reform. However, it seems that it is not a reality that is working throughout the United States, but it is working in the vast majority of the United States. Find out which are the 40 states in which you will not pay taxes on the financial aid you receive, updated to this 2024.
No taxed social benefits? What could happen in this states this month
Social Security benefits pay for over 40 million elderly people, and these checks keep the majority of them from falling into poverty. Such state taxes has been lawfully used by some states that has claimed a portion of these benefits which leaves a smaller pocket income for the beneficiaries
This s is an important change in policy due to the fact the majority of most states did not tax any of the benefits in the past. In some states, previously, an average of only 15% of the benefits from handouts could be state tax free. They argued that is a great unfairness that older and disabled people who may desperately require these funds at any given time, can be recipients.
We have been battling for so many years in the legislative maneuverings, and expressing the public opinion, and now legislators from around the country are reacting to it. Two years ago and up to now, state governments from the east to the west coast have had proposals for taxing of wages dismissed.
These states won´t tax social benefits in 2024: the vast majority of the country
The following 40 states do not tax social security benefits as of 2024:
- Alabama
- Alaska
- Arizona
- Arkansas
- California
- Delaware
- Florida
- Georgia
- Hawaii
- Idaho
- Illinois
- Indiana
- Iowa
- Kentucky
- Louisiana
- Maine
- Maryland
- Massachusetts
- Michigan
- Minnesota
- Mississippi
- Nevada
- New Hampshire
- New Jersey
- New York
- North Carolina
- North Dakota
- Ohio
- Oklahoma
- Oregon
- Pennsylvania
- South Carolina
- South Dakota
- Tennessee
- Texas
- Utah
- Virginia
- Washington
- Wisconsin
- Wyoming
This covers the majority of the United States, with these states located across the South, Midwest, West Coast, and Northeast regions. The remaining 9 states that still tax benefits to some degree are mainly clustered in New England and the Mountain West.
Having over 80% of states provide full exemption on taxation of Social Security benefits shows the clear direction most state governments are headed. This widespread policy aims to help retired individuals keep more of their benefits rather than lose a portion to taxes.
What about the other 9 states? Why they do tax social benefits in 2024
While most states have moved to exempt Social Security benefits from taxation, there are still 9 states that continue to tax benefits to some degree:
- Minnesota, Vermont, and North Dakota have no exemptions and tax Social Security benefits fully regardless of income level.
- Colorado, Connecticut, Kansas, Missouri, Nebraska, New Mexico, and Utah have exemptions for lower-income residents so only wealthier retirees pay taxes on benefits in those states. The income thresholds vary. For example, in Missouri, only individuals with income over $85,000 and married couples over $100,000 pay taxes on Social Security benefits.
The nine states insist transferees remain substantial taxpayers and claim the design of the original Social Security scheme outlined that it was subject to tax just like any regular income. Despite proponents indicating that taxing benefits hurts seniors with fixed incomes, opponents of this policy are of the opinion that such actions affect the wellbeing of these seniors.
The advocates of the provision of tax exemption will still conduct legislative lobbying to jurisdictions that haven’t complied in order to make sure that no tax is levied on benefits regardless of the income level. Yet, it may not be so fast with some states tend to get cautious lest the revenue lost, particularly without exemptions at the bottom layers.
As you can see, these 40 states are the ones that have confirmed that throughout 2024 you will continue to enjoy untaxed social benefits. The pressure the Biden administration is receiving to extend it to the remaining 10 is only comparable to the pressure it received to update Medicaid. In the latter case, it worked, will it work now? It remains to be seen.
