Retirees Who Move to a No Income Tax State Will Find 85% of Their Social Security Is Still Taxed
Moving to Florida or Texas wipes out state income tax, but a federal formula most retirees never see coming quietly cancels out a large share of those savings before the first year is even over.
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Retirees comparing Florida, Texas, Nevada, and Tennessee tend to start with the same line on the spreadsheet: no state income tax. That line counts, especially once IRA withdrawals and capital gains start. The federal formula that decides how much of a Social Security check shows up on Form 1040 works the same way in all 50 states, though.
Up to 85% of Social Security benefits can be federally taxable, no matter the ZIP code on the return, and a couple living off a mid-sized IRA hits that ceiling sooner than most relocation plans expect. Here is how the math works out and what it takes to keep the move’s savings.
How Federal Law Taxes Social Security in Every State
The IRS starts by adding one-half of your benefits, plus all your other income, including tax-exempt interest. That total is called provisional income. For joint filers, benefits start becoming taxable above a base amount of $32,000. Above an adjusted base of $44,000, the 85% tier applies.
Single filers use $25,000 and $34,000. The statute sets those dollar amounts and has never indexed them to inflation. Benefits, meanwhile, rise every year with the cost-of-living adjustment (COLA), including the 3.6% increase for 2027. Each COLA pushes more retirees toward the 85% cap, and moving to another state changes nothing.
A Florida Couple Living on $1.5 Million
Consider a couple, both over 65, collecting the 2026 aged-couple average of $3,238 a month, or $38,856 a year. They withdraw $60,000 from a traditional IRA, which is a 4% draw on $1.5 million. Their taxable Social Security comes to $33,028, the full 85%. Their deductions are the 2026 joint standard deduction of $32,200, plus $1,650 per spouse for age, plus the new $6,000 senior deduction each.
This deduction phases out above $150,000 in joint income and expires after 2028. Their federal tax comes to about $4,970. If their benefits were untaxed, the bill would be roughly $1,250. That $3,700 gap stays with them after the move.
Medicare Part B adds $202.90 per person per month. After taxes and Part B, about $89,000 of the $98,856 in gross income remains to spend. Florida’s price level is 103.414 against a national benchmark of 100, so that money goes a bit less far than average. One retiree featured by The Wall Street Journal spends about $80,000 a year in Lakewood Ranch.
As part of this spending, his property taxes rose by more than $2,200 a year, and his HOA fees run more than $700 a month. A $89,000 budget covers that kind of life, with something left over for wind insurance, home repairs, and a replacement car. The buffer is smaller than the “no income tax” pitch suggests.
Tax Torpedo Built Into Mid-Sized Withdrawals
In the phase-in zone, every extra dollar withdrawn from an IRA adds 85 cents of taxable Social Security. For this couple, withdrawals between about $33,700 and $47,100 face an effective federal marginal rate of 18.5%. From there up to about $56,400, the effective rate is 22.2%, even though they sit in the 12% bracket on paper. Beyond that, the marginal rate falls back to 12%.
A no-tax state leaves this zone in place and makes the fix cheaper. Roth conversions done before claiming Social Security, and before required distributions begin at 73, cost only federal tax. Qualified Roth withdrawals also stay out of provisional income.
Hypothetically, if $20,000 of their $60,000 came from a Roth, their tax would fall to about $1,160, a saving of roughly $3,800 every year. Putting off Social Security helps in two ways. Provisional income stays low during the conversion years, and delayed retirement credits make the future check permanently larger.
What It Takes to Keep the Move’s Savings
At the average couple’s benefit level, the Florida scenario above rests on about $1.5 million and a 4% withdrawal. The federal formula strategies include Roth conversions in the years after you leave work and before you claim, filling the 12% bracket up to $100,800 of taxable income, timing withdrawals to avoid the 18.5% and 22.2% bands, and staying under the $218,000 joint IRMAA threshold. Moving removes state tax.
The federal 85% still applies, and the main tool for reducing it is a Roth balance built before the first Social Security check arrives. Those quiet years between your last paycheck and your first required distribution are when conversions cost the least, which is the focus of our free Roth window guide.
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David Beren has been a Flywheel Publishing contributor since 2022. Writing for 24/7 Wall St. since 2023, David loves to write about topics of all shapes and sizes. As a technology expert, David focuses heavily on consumer electronics brands, automobiles, and general technology. He has previously written for LifeWire, formerly About.com. As a part-time freelance writer, David’s “day job” has been working on and leading social media for multiple Fortune 100 brands. David loves the flexibility of this field and its ability to reach customers exactly where they like to spend their time. Additionally, David previously published his own blog, TmoNews.com, which reached 3 million readers in its first year. In addition to freelance and social media work, David loves to spend time with his family and children and relive the glory days of video game consoles by playing any retro game console he can get his hands on.
