These States Have No Social Security Tax and the Best Cities for Retirement

Retirement requires years of planning and careful financial projections, including how far your money will take you. Part of that planning involves understanding how much you stand to receive from Social Security and how that may or may not be taxed, depending on your location.

Earlier this year, Investopedia compiled a list of 50 of the best cities to retire in across the U.S., using data that has been shown to be important to retirees, such as the cost of living and access to amenities like travel, health care, and entertainment. Most of the cities are in states that don’t tax Social Security benefits, as that’s an important part of the financial picture for many retirees. In contrast, others tax the program only in certain situations.

Nine states have some form of taxes on Social Security benefits, with varying limits like income and other criteria.

What States on The List Don’t Tax Social Security Benefits, or Only Do So Sometimes?

Here’s a region-by-region breakdown of the states that don’t tax Social Security benefits, and which cities we picked for our list of the best places to retire:

Midwest

• South Dakota (Gregory)
• Ohio (Toledo, Youngstown)
• Missouri (Poplar Bluff, Farmington)
• Iowa (Corning, Mason City)
• Michigan (Bay City, Saginaw)
• Indiana (Muncie)

Northeast

• Pennsylvania (Hermitage, Johnstown, Altoona)
• New York (Utica, Union)
• Massachusetts (Springfield, Pittsfield)
• New Hampshire (Concord, Conway)
• New Jersey (Vineland)

Southeast

• Georgia (Waycross)
• Virginia (Danville)
• South Carolina (Litchfield Beach)
• West Virginia (Wheeling) — 35% of benefits can be subtracted from taxable income for 2024 tax year, and that limit will increase to 65% next year and be fully deductible in 2026 and beyond.
• Mississippi (Natchez)
• North Carolina (Tryon)
• Louisiana (Alexandria)
• Florida (Sebring)
• Kentucky (Paducah)
• Tennessee (Paris)

Southwest

• Oklahoma (Hugo, Muskogee)
• Texas (Port Arthur, Eagle Pass, Longview)
• Arizona (Parker, Lake Havasu City)
• New Mexico (Las Vegas, Santa Rosa, Albuquerque) — Residents making an adjusted gross income of $100,000 alone or $150,000 filing jointly can deduct all of their Social Security benefits from their taxable income.

West

• Idaho (Pocatello, Twin Falls)
• Montana (Butte-Silver Bow, Great Falls) — Social Security benefits are not taxed for those making a single income of $25,000 or less, or a $32,000 joint income, and Montana uses a different method than the federal government for calculating taxes beyond that income level.
• Washington (Pomeroy, Omak)
• Nevada (Carson City)
• Wyoming (Evanston)
• Oregon (Ontario)
• Colorado (Pueblo) — Residents aged 65 or older can deduct all Social Security benefits from their taxes. Those who are between 55 and 64 years old can deduct up to $20,000 in benefits, and they are taxed at the state’s 4.4% rate after that. Next tax year, those in the 55-64 group with an adjusted gross income below $75,000 for an individual or $95,000 for a joint filing will be able to deduct all benefits.

What to Know About Taxes and The Rest of Your Retirement

Outside of Social Security, it’s important to consider how your other retirement income, like 401(k) or pension withdrawals, may be taxed.

Across the tax spectrum, Illinois, Iowa, Mississippi, and Pennsylvania are considered to be the most tax-friendly to retirees because of the many types of retirement income that are exempt from taxes in those states.

By the time some Americans retire, support could have grown among lawmakers for bills that have been introduced before, like exempting Social Security benefits from federal taxes. About 40% of Social Security beneficiaries, more than 27 million people, currently pay some federal taxes on their benefits.