How Retirees Can Beat the State Tax Game in 2025
By Keith Lucas

If you're nearing retirement and wondering where to land next, here's a reality check: not all states treat your Social Security check the same way. In fact, in 2025, 11 U.S. states still tax Social Security benefits, turning what should be your golden years into a strategic game of "Where can I keep more of my own money?"

I’m Keith Lucas, your Retirement Relocation Strategist (or as some folks call me, The Relo Whisperer). I help you figure out where to live next, without screwing up your money, your lifestyle, or your sanity. So let’s cut through the noise and decode the state tax traps you need to know about before you pack a single moving box.

The 2025 Retirement Tax Map: Where Social Security Still Gets Squeezed

Out of all 50 states, 41 plus Washington, D.C. offer full or partial exemptions on Social Security income. Sounds great, right? But don’t celebrate just yet. If you’re retiring in Colorado, Connecticut, Kansas, Minnesota, Vermont, or a handful of others, you’ll still feel the pinch.

Here’s what that looks like in 2025:

• Colorado: If you're 65+, you can deduct 100% of your federally taxed Social Security. If you're 55–64, only the first $20,000 is protected.

• Connecticut: Tax kicks in if you earn over $75,000 as a single filer or $100,000 jointly. Up to 25% of benefits can be taxed.

• Minnesota: Starts taxing benefits when singles hit $82,190 or couples hit $105,380 in adjusted gross income (AGI).

These state policies aren’t just footnotes. They can eat away at your retirement budget faster than you can say “early bird special.” That’s why knowing the tax rules by state is critical for retirees looking to maximize income and minimize tax liability.

Why Florida, Texas, and Nevada Are Still the Holy Grail

Now let’s talk about the states that don’t touch your Social Security benefits at all. These are the retirement meccas—and for good reason:

• Florida and Texas: No state income tax and senior-friendly property tax exemptions.

• Nevada: Not only tax-free on income, it also boasts the lowest effective property tax rate in the country at just 0.49%.

• Tennessee and Washington: High sales tax, yes—but no income tax. That’s a win for retirees who keep spending low and income passive.

As someone who has helped countless retirees relocate strategically, I can tell you—it’s not just about income tax. You’ve got to look at sales and property taxes, too. Some of these so-called “tax havens” quietly hit you elsewhere.

For instance:

• Tennessee’s sales tax averages 9.61%—one of the highest in the nation.

• Texas has no income tax, but their property tax rates are some of the most aggressive in the U.S.

The bottom line: If you're not doing a full tax ecosystem review before you move, you're playing checkers in a chess game.

The Hidden Costs You Didn’t See Coming

Let’s say you sidestep state income taxes. You could still be blindsided by:

• Sales taxes: Utah clocks in at 8.24%, and Tennessee is pushing 10%.

• Property taxes: Even in Florida, urban counties like Miami-Dade are no picnic thanks to elevated home values.

So while it might feel like you’re winning by avoiding income taxes, that savings can evaporate if you're not paying attention to the total tax burden.

As I always tell my clients: Tax-friendly doesn’t always mean tax-FREE. It just means you’ve got to play smarter.

Real Example: Tax Savings by the Numbers

Here’s how this plays out in the real world:

Let’s say you’re earning $30,000 in Social Security and another $20,000 in other retirement income.

• In Connecticut, you could owe 5.99% on 25% of your Social Security ($7,500). That’s a $449 annual tax bill just for living there.

• In Florida, you owe nothing—and you may even qualify for a $6,000 senior deduction.

That’s not just a couple of bucks. That’s compound savings that stretch your retirement dollars for decades.

The Strategic Relocation Playbook

Here's how I coach retirees on tax-efficient relocation:

1. Prioritize states with zero Social Security tax like Florida, Texas, and Nevada.

2. Weigh sales and property taxes in the overall cost of living equation.

3. Consider geographic diversification: own a second home in a tax-exempt state and legally split your time.

4. Watch legislative trends: states like Kansas and Missouri recently scrapped Social Security taxes, and more may follow.

5. Capitalize on deductions: states like Colorado offer partial deductions if you're under 65 and full deductions once you hit retirement age.

And for those with investable assets, I’ll let you in on a little insider strategy: invest in real estate in tax-friendly states. For example, rental income from property in Nevada comes with virtually zero state tax drag. That’s how you turn a smart relocation into a long-term wealth move.

A Landscape in Flux: The Tax Code is Changing Fast

Back in 2016, 13 states taxed Social Security. In 2025, it’s down to 11. Some states—Nebraska, Missouri, and Kansas—saw the light and made the switch to full exemption.

But don’t assume this trend will continue forever. States are under pressure to fill budget gaps, and retirees with higher income levels could still find themselves in the crosshairs.

Take Rhode Island and Vermont, for example. They still tax Social Security—but only for higher-income earners. So if you're sitting on a fat 401(k), you better keep an eye on those thresholds.

Final Thoughts: Where You Live Could Make or Break Your Retirement

As someone who’s worked in real estate for over 26 years, and now helps retirees navigate their relocation journey, let me be crystal clear:
Where you live in retirement will absolutely impact how far your money goes.

This is not just about sunshine and palm trees. This is about preserving your income, keeping more of your Social Security, and avoiding financial landmines that can wreck your retirement budget.

Whether you're ready to move now or just doing the research, do yourself a favor—think strategically. A little planning today could save you thousands each year.

If you’re looking for guidance on where to move that won’t eat up your Social Security with taxes, I’ve got you. Visit my website, check out my YouTube channel [Retirement Life USA], or grab a copy of my book Retirement Myths That Cost You Money—now on sale.

About the Author:
Keith Lucas is a former real estate broker and current relocation strategist helping retirees live better for less. As the founder of Retirement Life USA, he combines deep market knowledge with real-world tax strategies to help retirees find their next best move.