Taxation of Social Security benefits at the state level can significantly affect your overall retirement budget. How large the effect is, or whether there is an effect at all, depends on which state you retire to. While most states do not tax Social Security income, nine states impose taxes on all or part of these benefits. The specifics of how benefits are taxed depend on each state’s regulations and your income level.
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1. Colorado
In Colorado, Social Security benefits are subject to state income tax, but retirees can claim a sizable deduction. Residents aged 55 to 64 can deduct up to $20,000 of retirement income, while those 65 and older can deduct up to $24,000. This means that for many retirees, only a portion of their benefits may be taxed, depending on their total income from all sources.
2. Connecticut
Connecticut doesn’t tax Social Security benefits that are exempt from federal income tax and exempts some Social Security payments from taxation based on income level. Single filers with an adjusted gross income (AGI) below $75,000 and joint filers with an AGI below $100,000 are exempt from paying state taxes on their Social Security benefits. For those with higher incomes, benefits may be partially taxable.
3. Minnesota
In Minnesota, Social Security benefits are subject to state income tax, but exemptions are available. The exemption amount varies depending on income, with single filers earning less than $82,190 and joint filers earning less than $105,380 paying no tax on these benefits. The exemption decreases as income increases. All federally taxable benefits may be subject to state tax for single filers earning $118,191 and up and married filers with income of $141,381 and up.
4. Montana
Montana taxes Social Security benefits similarly to the federal government. That is, if your combined income, including half of your Social Security benefits, exceeds certain thresholds, a portion of your benefits will be subject to state income tax. For single filers, this threshold is $25,000, while for joint filers, it is $32,000. Retirees with lower incomes may avoid taxes on their Social Security benefits, but those with higher combined incomes may face partial taxation.
5. New Mexico
New Mexico residents may be exempt from paying state income taxes on Social Security benefits based on income and filing status. All Social Security income is exempt for single filers with less than $100,000 in income and for joint filers under $150,000 in income.
6. Rhode Island
Rhode Island taxes Social Security benefits, but it offers an exemption based on income. Single filers with an AGI below $95,800 and joint filers with an AGI below $119,750 are exempt from state taxes on Social Security benefits. Those with incomes above these thresholds may see their benefits partially taxed. Rhode Island’s approach aims to provide tax relief for lower- and middle-income retirees while still taxing higher earners.
7. Utah
Utah taxes Social Security benefits using the same flat 4.65% rate applied to other income, but also provides an income-based retirement tax credit that can partially offset the cost. Single filers with an AGI below $45,000 and joint filers with an AGI below $75,000 are eligible for the full credit.
8. Vermont
Vermont taxes Social Security benefits based on income level, similar to federal guidelines. Single filers with an AGI below $50,000 and joint filers with an AGI below $65,000 are exempt from state taxes on their Social Security benefits. For those above these income levels, a portion of the benefits may be subject to taxation.
9. West Virginia
West Virginia has long taxed Social Security benefits, and it still does as of 2024 and 2025. However, the state has begun a three-year phase-out program to eliminate these taxes by 2026. More specifically, taxpayers of all income levels will be able to exempt 35% of Social Security income on their 2024 taxes, 65% on their 2025 taxes and 100% on their 2026 taxes.
States That No Longer Tax Social Security Benefits
Several states have recently changed their tax policies regarding Social Security benefits. Missouri previously taxed Social Security income but stopped doing so in 2024, providing full exemption to retirees over age 62.
Also starting in 2024, Kansas exempts 100% of Social Security benefits from state taxes. Nebraska also completely phased out its taxes on Social Security income in 2024, further easing the tax burden on retirees.
| States That Do Not Tax Social Security Benefits | States That Tax Social Security Benefits |
| Alabama, Alaska, Arizona, Arkansas, California, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Nebraska, Nevada, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Virginia, Washington, Wisconsin, Wyoming | Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, West Virginia |
Bottom Line
Social Security benefit taxation varies significantly from state to state, impacting retirees differently depending on where they live. While some states have phased out taxes on these benefits, others still impose taxes based on income thresholds or other factors. Understanding these differences can help retirees make informed decisions about where to reside and how to manage their finances for maximum benefit in retirement.
Tax Planning Tips
- A financial advisor can help optimize your retirement nest egg for taxes. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- SmartAsset’s tax return calculator with updated brackets and rates to see how your income, withholdings, deductions and credits will affect your next refund or balance due.
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