Retirees in These 9 States Risk Losing Some of Their Social Security Checks

Social Security is an important piece of nearly every American's retirement budget. Around half of households with someone age 65 or older receive at least 50% of their income from Social Security and about one-quarter receive at least 90% of their income from the program.

With the importance of Social Security benefits for so many retirees, it's important to keep every penny of them if possible. Unfortunately, for those living in nine states, there's a chance they'll see a reduction in those monthly checks. Depending on your income, your state might tax a portion of your benefits.

Here's what you need to know.

How to keep more of your Social Security benefits

Before focusing on individual states, everyone collecting Social Security should know how their benefits are taxed by the federal government.

The U.S. government uses a metric called "combined income" to determine what portion, if any, of your Social Security benefits are subject to income tax. Combined income is the sum of half your Social Security income, your adjusted gross income, and any untaxed interest income. If your income exceeds the thresholds detailed below, you'll have to pay ordinary income tax on a portion of your benefits.

Taxable Portion of Benefits

Combined Income, Individual

Combined Income, Married Filing Jointly

0%

Less than $25,000

Less than $32,000

Up to 50%

$25,000 to $34,000

$32,000 to $44,000

Up to 85%

Over $34,000

Over $44,000

Data source: Social Security Administration.

You'll notice those thresholds are extremely low. That's because Congress hasn't updated those numbers for inflation since they were first created in the 1980s and 1990s. As such, more and more retirees are losing more and more of their benefits to taxes every year.

You can avoid paying some taxes on your Social Security income with good tax planning, though. If you can get more of your retirement savings into Roth accounts, withdrawals from those accounts won't count toward your combined income.

Still, you'll have to be very mindful of your capital gains and traditional retirement account withdrawals plus any interest earned on your cash holdings. Every penny counts when it comes to keeping your Social Security benefits tax-free.

If that wasn't enough to worry about, retirees in nine states also have to consider the potential burden of state taxes.

Image source: Getty Images.

9 states that tax Social Security

Many states don't tax Social Security benefits, and the number of states that do keeps getting smaller. For example, Missouri and Nebraska eliminated their Social Security taxes in recent years (effective in 2024), and Kansas eliminated it this year (effective immediately). There are just nine remaining states that will tax Social Security in 2024.