How Florida Taxes Social Security and Retirement Income

Florida continues to be one of the most attractive retirement destinations in the country – and not just for the climate. With no state income tax, no estate or inheritance tax and a relatively low overall tax burden, the Sunshine State can offer significant financial advantages for retirees looking to preserve and extend their wealth.

If you're approaching retirement and considering a move to Florida (or already living there), it’s important to understand how your income will be treated from a tax perspective.

The short answer? Florida may offer more flexibility and fewer tax surprises than most states, but to truly plan for these benefits, you need a smart, coordinated income strategy.

Let’s take a closer look.

SOCIAL SECURITY

Let’s start with a big win for retirees: Florida does not tax Social Security benefits.

That includes:

• Retirement benefits
• Disability benefits
• Survivor benefits
• Supplemental Security Income

In fact, Florida doesn’t tax any personal income at the state level – Social Security or otherwise. That makes it one of the most tax-friendly states in the country for retirees. But before you assume you're in the clear, it’s still important to consider how other types of retirement income are treated federally and what that means for your overall financial plan.

RETIREMENT INCOME BEYOND SOCIAL SECURITY: WHAT TO EXPECT

Florida’s lack of a state income tax means that none of your retirement income will be taxed at the state level. That includes:

• Traditional IRA and 401k withdrawals
• Private and public pensions
• Roth IRA and Roth 401k distributions
• Capital gains, dividends and interest
• Rental, business or consulting income

While other states may offer partial exclusions or age-based deductions, Florida’s zero-income-tax structure offers across-the-board relief – regardless of age or income level. It’s simple and it’s one of the reasons why many retirees flock here each year.

WHAT ABOUT FEDERAL TAXES ON RETIREMENT INCOME?

Florida may give your retirement income a pass, but the IRS still takes its share. Here’s what to keep in mind.

SOCIAL SECURITY AND THE IRS

While Florida won’t touch your Social Security benefits, the federal government may. How much is taxed depends on your provisional income, which includes:

• Adjusted gross income
• Tax-free interest (like from municipal bonds)
• 50% of your Social Security benefits

Depending on your income and filing status, up to 85% of your Social Security benefits could be subject to federal taxes.

Federal Taxation Thresholds for Social Security

If you have income from a 401k, traditional IRA or taxable investments, chances are a portion of your Social Security benefits will be federally taxed.

FLORIDA’S TAX STRUCTURE: WHAT ELSE SHOULD RETIREES KNOW?

While Florida doesn’t tax income, there are still other state and local taxes to plan for, including:

• Sales Tax: The state sales tax rate is 6%, but local counties can add up to 2.5%, depending on where you live.
• Property Taxes: Property tax rates are relatively moderate, but values can be high in popular areas. Fortunately, Florida offers homestead exemptions that can help reduce your property tax bill if the home is your primary residence.
• No Inheritance or Estate Tax: Florida does not levy a state estate or inheritance tax, which can be a relief for those concerned about passing wealth to future generations.

While the overall tax picture is favorable, understanding how these pieces fit together is key to managing your retirement income effectively.

STRATEGIC TAX PLANNING STILL MATTERS – EVEN IN FLORIDA

Living in a state with no personal income tax offers clear advantages, but federal taxes still apply and without proper planning, they can take a meaningful bite out of your retirement income. Fortunately, there are smart ways to help manage that impact.

Here are several strategies that can help you streamline your tax efficiency in retirement:

1. Optimize the Timing of Social Security

Delaying your Social Security benefits past full retirement age can increase your monthly benefit and give you more control over your taxable income in the early years of retirement, especially if you’re drawing from other sources.

2. Use Roth Accounts to Your Advantage

Withdrawals from Roth IRAs and Roth 401ks in retirement are not subject to federal income tax and don’t count toward the formula that determines how much of your Social Security is taxable. That makes Roth assets a powerful tool for income flexibility.

3. Diversify Withdrawal Sources Thoughtfully

The order and timing of withdrawals from traditional IRAs, taxable investment accounts and Roth accounts can affect everything from your federal tax bracket to your Medicare premiums. A coordinated strategy can help you stay within optimal income thresholds year-to-year.

4. Incorporate Qualified Charitable Distributions

If charitable giving is part of your legacy goals, consider using QCDs. Starting at age 70 ½, you can direct up to $108,000 (for the 2025 tax year) per year from your IRA to a qualified charity – satisfying your Required Minimum Distributions while keeping that income out of your federal tax calculation.

5. Evaluate Roth Conversions Before RMDs Begin

Depending on your current and future tax situation, converting part of your traditional IRA to a Roth can reduce taxable income later in retirement, particularly after RMDs kick in at age 73 or 75. The goal is to lower lifetime taxes, not just taxes in a single year.

THINKING OF MOVING TO FLORIDA FROM ANOTHER STATE?

If you’re relocating from a higher-tax state like New York, New Jersey or California, it’s not enough to just buy a house in Florida. To gain the full tax benefits of residency, you’ll need to officially establish Florida as your primary home.

That typically includes:

• Spending more than half the year (183+ days) in Florida
• Changing your driver’s license and vehicle registration
• Registering to vote in Florida
• Declaring Florida residency on legal documents and tax filings

Careful documentation is key to avoiding dual-residency claims and potential tax liabilities in your former state.

RETIRE SMARTER IN FLORIDA

Florida’s zero income tax environment is a game changer for retirees, but true financial peace of mind comes from proactive planning. With the right strategy, you can help:

• Shield more of your savings from federal taxation
• Maximize every dollar of Social Security and retirement-account withdrawals
• Sidestep pitfalls around RMDs, Medicare surcharges and income timing
• Smoothly establish Florida residency, if you’re making the move

Ready to harness Florida’s advantages and build a tax-savvy retirement plan? A financial advisor and a tax-smart income strategy can help you design a retirement income plan tailored to Florida’s unique advantages. Let’s plan to make your retirement as sunny as your destination.