Moving to another state can have a host of benefits, but it often rewrites your financial plans. A new home brings a new cost of living, and that affects how far your money goes, for better or worse.
Some retirees also fear that moving could hurt their Social Security benefits. This is possible, though it's less common than most people fear. Here's how to know whether your move could affect your benefits.
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Your benefit amount won't change ...
The Social Security Administration uses the same formula to calculate benefits for seniors in every state. It looks at the following three factors:
- The number of years you have worked
- Your income during those years
- Your claiming age
You could argue that your state might have some effect on your income throughout your career. If you live in an area with a higher cost of living and higher average salaries, you'll likely wind up with a larger benefit than someone who lives in a more affordable area with lower average salaries. But there are low- and high-paying jobs in all states.
... but your take-home total might
Even though your official benefit won't change because of a move, the amount you get to keep might. In 2024, 10 states tax Social Security benefits for some of their seniors. They are:
- Colorado: The state doesn't tax the Social Security benefits of any of its residents 65 or older. The first $20,000 in benefits is exempt for adults under 65, but those who receive more could owe 4.4% on any benefits over this threshold.
- Connecticut: Taxpayers are exempt from state Social Security benefit taxes if their adjusted gross income (AGI) is less than $100,000 for married couples filing jointly or $75,000 for all other filers. Those with higher AGIs might qualify for a partial exemption, which would cap their taxable Social Security benefits at 25% of the amount received during the year. State income tax rates start at 2%.
- Kansas: It taxes the Social Security benefits of all beneficiaries with AGIs greater than $75,000, regardless of their filing status. The tax rate for these residents is 5.7%.
- Minnesota: Residents can deduct up to a maximum of $4,560 for single filers and heads of household. Married couples filing jointly have a maximum deduction of $5,840, while those filing separately have their deduction capped at $2,920. These limits are lower for those with incomes exceeding $69,250 for single filers and heads of household, $88,630 for married couples filing jointly, and $44,315 for married couples filing separately. State income tax rates range from 5.35% to 9.85%.
- Montana: Montana uses combined income (or provisional income) to determine who owes Social Security benefit taxes, the same method the federal government uses. Single adults with combined incomes greater than $25,000 and married couples filing jointly with combined incomes greater than $32,000 owe benefit taxes of either 4.7% or 5.9%.
- New Mexico: New Mexico exempts seniors from Social Security benefit taxes if their incomes are less than $100,000 for single adults; $150,000 for married couples filing jointly, surviving spouses, and heads of household; or $75,000 for married couples filing separately. State income tax rates range from 1.7% to 4.9%.
- Rhode Island: It taxes the Social Security benefits of seniors who claim under their full retirement age (FRA) if their AGI exceeds $101,000 for single filers and heads of household, $126,250 for married couples filing jointly, or $101,025 for married couples filing separately in 2023. Updated figures for 2024 aren't available. Income tax rates in the state range from 3.75% to 5.99%.
- Utah: Utah exempts seniors from state Social Security benefit taxes if their modified adjusted gross income (MAGI) is under $45,000 for single filers, $75,000 for married couples filing jointly and heads of household, and $37,500 for married couples filing separately. Your exemption drops by $0.025 for each dollar your MAGI exceeds the above thresholds for your filing status. Utah has a flat 4.65% income tax rate.
- Vermont: Vermont doesn't tax the Social Security benefits of married couples filing jointly with AGIs under $65,000 or other filers with AGIs under $50,000. Joint filers with AGIs between $65,000 and $75,000 and other filers with AGIs between $50,000 and $60,0000 qualify for a partial exemption. State income tax rates range from 3.35% to 8.75%.
- West Virginia: Married couples with AGIs under $100,000 and other filers with AGIs under $50,000 are exempt from its state Social Security benefit tax. Those who don't qualify for this exemption could pay anywhere from 3.825% to 5.525% in income taxes on their benefits.
Moving to or from one of these states could affect how much of your Social Security benefits you get to keep. But as the above list shows, even many residents in these states don't owe benefit taxes, in which case a move might not affect your benefits at all.
The federal government taxes the Social Security benefits of some seniors in all states. Whether you'll owe these depends on your provisional income, which includes your AGI. Theoretically, if you're living in a more expensive state that forces you to withdraw more from your retirement accounts, this could raise your AGI and increase your likelihood of owing federal Social Security benefit taxes.
But this is just one of many considerations when contemplating a move. You also have to consider state tax rates, cost of living, quality of healthcare, proximity to family, weather, and a bunch of other things. For some, a small dip in their annual Social Security benefits could be well worth it if the move brings improvements in many of these other important areas.
