As of 2025, nine states will continue to tax Social Security benefits, each with specific provisions and exemptions. Understanding these nuances is crucial for retirees planning their finances.
Here’s a breakdown of these states and their taxation policies:
1. Colorado
In Colorado, Social Security benefits are taxable. However, retirees aged 55 to 64 with an adjusted gross income (AGI) of $75,000 or less (individuals) or $95,000 or less (couples filing jointly) can fully deduct federally taxed benefits.
2. Connecticut
Connecticut taxes Social Security benefits but offers exemptions. Single filers with an AGI below $75,000 and joint filers below $100,000 are exempt from state taxes on these benefits.
3. Minnesota
In Minnesota, Social Security benefits are subject to state tax. However, married filers with an AGI under $105,380 and single filers under $82,190 are exempt from this taxation.
4. Montana
Montana taxes Social Security benefits. Single filers with an AGI less than $25,000 and joint filers under $32,000 can deduct all their Social Security benefits from state taxes.
5. New Mexico
New Mexico taxes Social Security benefits. However, individuals earning less than $100,000 and married couples earning less than $150,000 are exempt from this tax.
6. Rhode Island
In Rhode Island, Social Security benefits are taxable. Yet, individuals with an AGI below $88,950 and joint filers below $111,200 are exempt from state taxes on these benefits.
7. Utah
Utah taxes Social Security benefits following federal guidelines. Single filers earning less than $30,000 and joint filers earning less than $50,000 are exempt from state taxation on these benefits.
8. Vermont
Vermont taxes Social Security benefits. However, married couples with an income below $65,000 and individuals earning less than $50,000 are exempt from this tax.
9. West Virginia
West Virginia currently taxes Social Security benefits but is phasing out this tax. For 2024, taxes are reduced by 35%; in 2025, by 65%; and by 2026, the tax will be fully eliminated. Currently, individuals earning less than $50,000 and joint filers earning less than $100,000 are exempt.
Understanding Social Security Payments
Social Security benefits are monthly payments to eligible retirees, disabled individuals, and their families. The payment schedule typically follows this pattern:
- Birth Date 1st–10th: Payments on the second Wednesday of each month.
- Birth Date 11th–20th: Payments on the third Wednesday.
- Birth Date 21st–31st: Payments on the fourth Wednesday.
Cost-of-living adjustments (COLA) can influence payment amounts, reflecting changes in inflation to maintain beneficiaries’ purchasing power. For instance, a 2.5% COLA increase is scheduled for January 2025, averaging an additional $50 per month for recipients.
Tips for Managing Social Security Taxes
- Stay Informed: Regularly review your state’s tax policies, as they can change and impact your benefits.
- Consult Professionals: Engage with tax advisors to understand potential liabilities and explore strategies to minimize taxes.
- Consider Relocation: If state taxes significantly impact your benefits, consider relocating to a state that doesn’t tax Social Security income.
Understanding how state taxes affect your Social Security benefits is essential for effective retirement planning. Stay informed and consult professionals to make decisions that best suit your financial situation.
Archer Bannister is a journalist with 4 years of experience covering hard-hitting stories. Currently working with Mikeandjonpodcast, Archer specializes in delivering timely and in-depth updates on a variety of topics, including crime news, politics, and national issues affecting the USA. His expertise and dedication to delivering accurate, impactful news make him a trusted voice for audiences seeking to stay informed on critical topics.
