For retirees living on fixed incomes, taxation of Social Security benefits can significantly impact their financial well-being.
While most states spare retirees from paying taxes on these crucial benefits, nine states still take a bite out of this retirement income source.
Understanding which states tax Social Security—and how they do it—can be essential when planning where to spend your retirement years.
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The majority of states offer tax relief
Good news for most retirees: 41 states completely exempt Social Security benefits from state income tax.
This widespread exemption acknowledges the importance of benefits, which typically account for about 40% of total income for Social Security recipients.
However, nine states still impose some form of taxation on these benefits, though most offer exemptions based on age, income thresholds, or other factors.
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Colorado
Colorado provides a full deduction of Social Security benefits for residents age 65 and older.
Starting in 2025, residents between 55-64 years old will enjoy a complete exemption if their adjusted gross income (AGI) falls below $75,000 for single filers or $95,000 for joint filers. Those exceeding these thresholds can still claim a smaller $20,000 deduction.
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Connecticut
Connecticut exempts Social Security benefits from taxation for residents with AGI below $75,000 (single or married filing separately) or $100,000 (joint filers or head of household).
For those with higher incomes, up to 25% of benefits may be subject to state tax.
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Minnesota
Minnesota taxes federally taxable benefits but offers a subtraction that fully exempts many retirees.
This exemption gradually phases out above specific AGI thresholds: $108,320 for married filing jointly, $84,490 for single or head of household, and $54,160 for married filing separately.
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Montana
Montana taxes Social Security benefits that are federally taxable. However, the state introduced a modest $5,500 subtraction from federal taxable income for those 65 and older ($11,000 for joint filers) in 2024.
This subtraction will be indexed for inflation beginning in 2025.
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New Mexico
New Mexico provides an exemption for Social Security benefits for single filers with AGI up to $100,000 and joint filers with AGI up to $150,000.
Unlike some other states, these AGI limits aren’t adjusted for inflation.
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Rhode Island
Rhode Island exempts Social Security benefits for retirees who have reached full retirement age and whose AGI in 2024 falls below $104,200 for most filers or $130,250 for joint filers.
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Utah
Utah has recently increased its exemption threshold. Social Security benefits are not taxable if AGI is $90,000 or less for married taxpayers filing jointly, up from the previous $75,000 threshold.
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Vermont
Vermont fully exempts Social Security benefits for taxpayers below certain AGI thresholds: $50,000 for single filers or married filing separately, and $65,000 for joint filers.
A partial exemption phases out as income rises, disappearing completely at $60,000 for single filers or $75,000 for joint filers.
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West Virginia
West Virginia is currently phasing out its taxation of Social Security benefits. In 2025, 65% of benefits will be deductible.
The state has scheduled a complete elimination of this tax (100% deduction) for 2026, regardless of income level.
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Considerations beyond income tax
Many states are trending toward more retiree-friendly tax policies, with some reducing or eliminating taxes on retirement income and Social Security benefits.
Others are expanding deductions for military retirement income or reducing sales taxes on essentials like groceries.
When evaluating potential retirement locations, don’t just focus on Social Security taxation. Consider the complete financial picture—including overall cost of living, healthcare access, climate preferences, and quality of life factors—to find the best place to enjoy your retirement.
Expert advice can help sort through these different factors. If you’ve got at least $100,000 in investments, check out a free service called SmartAsset. You fill out a short questionnaire and instantly get matched with up to three vetted financial advisors in your area.
Know how much social security taxes may affect you
These taxes may not be a primary concern for retirees who depend mainly on Social Security since most states’ exemptions cover lower-income beneficiaries.
However, those with multiple income sources or higher overall income should carefully consider how each state’s tax system might affect their retirement finances.
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