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As of November 2012, there were seven states that did not charge any type of state income tax, including taxes on Social Security benefits. These states include Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. Two more states, Tennessee and New Hampshire, do not tax income or Social Security benefits, but do tax interest and dividends.
Finally, donât assume that your state taxes the same amount of benefits as Uncle Sam. In most states, Social Security is still completely tax-free. Take a look at our state-by-state guide to taxes on retirees to learn more about how you will be taxed during retirement based on where you live. See Also: 15 Worst States for Retirement