Social Security benefits are essential for millions of retirees in the United States, ensuring they have financial stability after years of work.
However, depending on where you live, a portion of these benefits might be reduced due to state taxes.
In 2025, nine states will continue taxing Social Security benefits, directly impacting retirees’ income.
Here’s what you need to know about these taxes, which states are involved, and how you can minimize their effects.
States That Tax Social Security Benefits
While states like Missouri and Kansas have recently stopped taxing Social Security, nine others will still impose taxes. Here’s a detailed breakdown of those states:
- Colorado: If you earn under $75,000 (single) or $95,000 (couple), you can fully deduct federally taxed benefits. Those earning above these thresholds will need to pay state taxes.
- Connecticut: Retirees earning less than $75,000 (single) or $100,000 (couple) are exempt from Social Security taxes, offering relief to lower-income residents.
- Montana: Exemptions apply only to incomes below $25,000 (single) or $32,000 (couple). Most retirees with additional pensions or investments may still face taxes.
- Rhode Island: Incomes under $88,950 (single) and $111,200 (couple) are exempt, providing relief for many retirees in the state.
- Utah: Tax-free status applies to retirees earning below $30,000 (single) or $50,000 (couple).
- Vermont: Exemption limits are $50,000 (single) and $65,000 (couple), leaving many retirees affected.
- Minnesota: Retirees earning less than $82,190 (single) or $105,380 (couple) will not pay Social Security taxes.
- West Virginia: Currently phasing out Social Security taxes, the state taxes benefits at 35% in 2025, with full exemption expected by 2026.
- New Mexico: Exemptions apply to incomes under $100,000 (single) and $150,000 (couple), benefiting most retirees.
Why Do States Tax Social Security Benefits?
Some states rely on Social Security taxes to balance their budgets and fund essential services.
These taxes can supplement state revenues but often create financial strain for retirees, especially those on fixed incomes.
Strategies to Minimize Tax Impact
- Relocate to Tax-Free States: Moving to states that don’t tax Social Security, such as Florida or Texas, can help retirees keep more of their benefits.
- Manage Your Income: Adjust your income sources to stay within your state’s exemption limits. This includes carefully managing withdrawals from retirement accounts.
Which States Are Most Retiree-Friendly?
States like Florida, Texas, and Nevada stand out as retiree-friendly because they have no state income tax and don’t tax Social Security benefits.
These states are popular destinations for retirees seeking to maximize their income.
How Do Taxes Affect Retirees?
For retirees living in states that tax Social Security benefits, understanding how much you’ll owe is key to managing finances.
Each state sets different income thresholds for exemptions, and exceeding these limits could mean paying taxes on a portion of your benefits.
To calculate the tax impact:
- Add up all your income sources for the year, including Social Security, pensions, and investments.
- Check if your income exceeds your state’s exemption threshold.
- If it does, calculate taxes on the amount above the exemption limit based on your state’s tax rate.
This process helps you anticipate how much Social Security taxes will reduce your net income.
State-by-State Tax Overview
| State | Single Exemption | Married Exemption | Notes |
|---|---|---|---|
| Colorado | $75,000 | $95,000 | Full deduction below income limits. |
| Connecticut | $75,000 | $100,000 | Exemptions for lower-income retirees. |
| Montana | $25,000 | $32,000 | Strict limits leave many taxed. |
| Rhode Island | $88,950 | $111,200 | Generous exemptions for most retirees. |
| Utah | $30,000 | $50,000 | Low thresholds mean many are taxed. |
| Vermont | $50,000 | $65,000 | Significant portion affected. |
| Minnesota | $82,190 | $105,380 | No taxes below these thresholds. |
| West Virginia | Gradual reduction | Gradual reduction | Full exemption expected by 2026. |
| New Mexico | $100,000 | $150,000 | High exemption limits help most retirees. |
Final Thoughts
As 2025 approaches, retirees in these nine states must prepare for the continued taxation of Social Security benefits.
By understanding the income thresholds and planning accordingly, you can reduce the impact of these taxes.
Additionally, exploring more retiree-friendly states or managing income strategically can help you make the most of your retirement years.
Stay informed about your state’s tax policies to ensure financial stability in the years to come.
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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.
