By Mark Henricks

The trend of states eliminating income taxes on Social Security benefits continued in 2024, with three more states joining the more than 40 that already exempt the monthly government retirement payments from state income taxes. Social Security retirement recipients in Kansas, Missouri and Nebraska won’t have to pay their states’ income taxes on their benefits under legislation that takes effect for the 2024 tax year. More states are likely to stop taxing Social Security payments, with West Virginia and Utah appearing to be next in line.

A financial advisor can help you develop a retirement plan that includes Social Security and beyond. Get matched for free today.

Social Security Benefits Tax Background

Until 1984, Social Security retirement benefits were exempt from federal and state income taxes. Then President Ronald Reagan signed a law passed by Congress the previous year allowing a tax to be applied to a portion of benefits above a certain income level.

This kicked off a trend toward increasing taxation of Social Security benefits, as many states followed suit, using a variety of income levels and percentage amounts of benefits that would be subject to their state income taxes. At the federal level, the amount of benefits that could be subject to federal taxes was increased in 1993.

In recent years that trend has reversed. Federal initiatives to end Social Security benefit taxes were part of both presidential candidates in 2024. Before that, a number of states had started eliminating their income taxes on Social Security income. By 2024, only nine states still tax Social Security benefits. During the year, an end to the practice was announced by three more states – Kansas, Missouri and Nebraska.

1. Kansas

Kansas Social Security recipients won’t have to pay state income taxes on their benefits starting with 2024 income. Previously, state income taxes of 5.7% were due on benefits received by taxpayers who had adjusted gross income of $75,000 in income. Ending the tax will save the state’s retirees a total of approximately $100 million annually.

2. Missouri

In Missouri, Social Security retirement benefits will be tax-free for recipients age 62 or older, starting in 2024. Previously, the state taxed a portion of Social Security benefits, with exemptions that were phased out for single filers with income of more than $85,000 and joint filers with income above $100,000. The change will save residents $309 million in tax payments annually.

3. Nebraska

Nebraska was already gradually ending Social Security benefit taxes, but pushed up the date for a 100% exemption to start it in 2024. Previously, the state had been going through a multi-year phase-out of taxes on retirement benefits, at least a portion of which were potentially subject to the state’s top income tax rate of 6.64%.

Social Security Benefit Tax Trends

President-elect Donald Trump promised to end taxes on Social Security benefits during his campaign, suggesting that it’s possible a federal exemption on all Social Security retirement income could be forthcoming soon. Meanwhile, the number of states that exempt all Social Security benefits from state income taxes stands at 44, including the three new additions.

The trend toward less state taxation of Social Security appears likely to continue, at least in the short term. A complete exemption for Social Security is being gradually implemented in West Virginia. And the Utah governor’s fiscal year 2026 budget includes a proposal to end Social Security taxes in that state.

A financial advisor can help you monitor changes to legislation that may affect your financial plan and help you devise strategies to adapt.

Social Security Tax Effects

Exempting Social Security income from state income taxes benefits retirees immediately by increasing their after-tax income. However, the exemptions also reduce the amount of revenue available to state governments.

At the federal level, exempting Social Security benefits from taxes directly affects the stability of the Social Security system, because taxes on these benefits are paid into the trust fund. The initial imposition of taxes on Social Security benefits in the 1980s was a response to financial challenges the system faced at the time.

While the trend toward ending taxation of these payments is well-established and even accelerating, Social Security benefit taxes have risen and fallen over the long term. It remains to be seen whether governments will be able to continue the exemptions as they confront declining revenues and threats to future retirees’ benefits. 

Talk to a financial advisor if you’re interested in professional guidance for retirement income and tax planning based on your personal circumstances and goals.

Bottom Line

Kansas, Missouri and Nebraska have become more friendly to retirees by joining the list of states that don’t tax Social Security retirement benefits. The changes, which are effective for 2024 income, bring to 44 the total number of states that exempt Social Security income from state income taxes. In the next couple of years, West Virginia is slated to become a member of that group as a multi-year phase-out of its Social Security benefit tax is completed. Utah may also stop taxing Social Security benefits. 

Tips

  • Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now
  • Find out now how much you’re likely to collect in government retirement benefits after you stop working by using SmartAsset’s Social Security Calculator.
  • Keep an emergency fund on hand in case you run into unexpected expenses. An emergency fund should be liquid — in an account that isn’t at risk of significant fluctuation like the stock market. The tradeoff is that the value of liquid cash can be eroded by inflation. But a high-interest account allows you to earn compound interest. Compare savings accounts from these banks.
  • Are you a financial advisor looking to grow your business? SmartAsset AMP helps advisors connect with leads and offers marketing automation solutions so you can spend more time making conversions. Learn more about SmartAsset AMP.

Photo credit: ©iStock.com/jimkruger

Information contained on this page is provided by an independent third-party content provider. XPRMedia and this Site make no warranties or representations in connection therewith. If you are affiliated with this page and would like it removed please contact [email protected]