Will Your State Tax Social Security in 2025? See If You’re Affected!

Americans relying on Social Security benefits are set to face changes in 2025 as nine states continue to impose taxes on this vital income.

While most states exempt these benefits from taxation, others have specific thresholds and conditions. Here’s everything you need to know about the states taxing Social Security and the impact on retirees.

A Financial Strain for Retirees

Social Security benefits are a lifeline for many retirees, disabled workers, and families of deceased workers. After years of contributing to the system through payroll taxes, individuals rely on this income to navigate retirement. Taxing these benefits could create additional challenges, especially during tough economic times.

In 2024, Missouri and Kansas stopped taxing Social Security benefits, joining 41 other states that exempt these payments. However, nine states still impose taxes, often with specific income thresholds.

The Nine States Taxing Social Security Benefits

1. Colorado

Colorado, with a population of nearly six million, will continue taxing Social Security benefits in 2025. However, deductions are available for:

• Individuals with an adjusted gross income (AGI) of $75,000 or less.
• Couples filing jointly with an AGI of $95,000 or less.

2. Connecticut

Connecticut follows a similar structure but with slightly higher income limits:

• Couples filing jointly are exempt if their AGI is $100,000 or less.
• Individuals must have an AGI below $75,000 to avoid taxes.

3. Minnesota

Minnesota offers a higher income threshold for exemptions:

• Married couples: AGI of $105,380 or less.
• Individuals: AGI of $82,190 or less.

4. Montana

Montana applies taxes on Social Security benefits for:

• Individuals with AGI above $25,000.
• Married couples filing jointly with AGI over $32,000.

As of 2024, Montana has a population of around 1.1 million and remains a Republican-leaning state.

5. New Mexico

New Mexico offers a more lenient policy:

• Individuals with AGI below $100,000 are exempt.
• Married couples filing jointly are exempt if their AGI is $150,000 or less.

6. Rhode Island

Rhode Island allows exemptions for:

• Individuals with AGI under $88,950.
• Married couples filing jointly with AGI below $111,200.

7. Utah

In Utah, exemptions apply to:

• Single filers earning $30,000 or less.
• Married couples with income below $50,000.

8. Vermont

Vermont’s thresholds for exemptions are:

• Individuals with AGI of $50,000 or less.
• Married couples filing jointly with AGI of $65,000 or less.

9. West Virginia

West Virginia plans to phase out Social Security taxes but will continue taxing in 2025:

• Individuals earning above $50,000.
• Married couples filing jointly with AGI over $100,000.

The state is gradually reducing the tax burden, with a 65% reduction from 2023 levels planned for 2025.

What Does This Mean for Retirees?

For many retirees, Social Security benefits form a significant portion of their income. Taxing these benefits can reduce the available funds for essential expenses.

States with higher exemption thresholds, such as Minnesota and New Mexico, provide more relief compared to others like Montana and Utah with lower limits.

States Offering Relief

The good news is that most states—41 in total—do not tax Social Security benefits. This includes Missouri and Kansas, which recently ended their taxation policies.

Retirees in these states have more financial freedom to use their benefits without additional deductions.

Preparing for 2025

Retirees in the nine states taxing Social Security should review their income and tax situation to understand how these policies will affect them. Exploring deductions, exemptions, and financial planning options can help minimize the impact.

For those considering relocation, states without Social Security taxes might offer a more favorable financial environment.

Conclusion

While most states provide relief by exempting Social Security benefits from taxes, the nine states taxing them in 2025 have varying thresholds and conditions. Understanding these policies is essential for retirees to manage their finances effectively.

By planning, retirees can navigate the challenges posed by these tax rules and ensure their benefits continue to support their needs.

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