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Accounting, Taxes, 1031 Exchanges, Capital Gain Taxes

States That Tax Social Security Benefits in 2025

If you’re planning for retirement, understanding how your Social Security benefits will be taxed is crucial. While the federal government may tax a portion of your benefits based on income, most states do not. However, in 2025, nine states still tax Social Security income, and each has its own rules and exemptions. Here’s a detailed breakdown to help you plan smarter and potentially save thousands in retirement.

States That Tax Social Security Benefits

As of 2025, the following nine states tax Social Security benefits in some form:

  1. Colorado
  2. Connecticut
  3. Minnesota
  4. Montana
  5. New Mexico
  6. Rhode Island
  7. Utah
  8. Vermont
  9. West Virginia

Let’s explore how each state handles Social Security taxation.

State-by-State Breakdown of Taxes to Social Security Benefits

1. Colorado

  • Tax policy: Colorado allows a deduction of up to $24,000 for retirees aged 55 and older.
  • Income thresholds: If you’re under 65, only the first $20,000 of federally taxable Social Security income is deductible.
  • Tax rate: Flat 4.4% income tax.

2. Connecticut

  • Exemptions: Single filers with AGI under $75,000 and joint filers under $100,000 pay no tax on Social Security.
  • Above threshold: Up to 25% of benefits may be taxed if income exceeds these limits.

3. Minnesota

  • Partial exemption: Benefits are taxed based on federal taxable amount, but a subtraction is available.
  • Phase-out thresholds: Full exemption for joint filers under $105,380 and single filers under $82,190.

4. Montana

  • Federal conformity: Montana follows federal rules for taxing Social Security.
  • Income-based: Benefits are taxed if your AGI exceeds $25,000 (single) or $32,000 (joint).

5. New Mexico

  • High-income only: Most retirees are exempt. Tax applies only if income exceeds:
  • $100,000 (single)
  • $150,000 (married filing jointly)
  • $75,000 (married filing separately)

6. Rhode Island

  • Age and income limits: No tax if you’re at or above full retirement age and your AGI is below:
  • $104,200 (single)
  • $130,250 (joint)

7. Utah

  • Credit available: Taxpayers may claim a nonrefundable credit to offset Social Security taxes.
  • Income thresholds: Credit phases out above:
  • $45,000 (single)
  • $75,000 (joint)
  • $37,500 (married filing separately)

8. Vermont

  • Income-based exemption: Full exemption for AGI under $50,000 (single) or $65,000 (joint).
  • Partial exemption: Phases out completely at $60,000 (single) and $75,000 (joint).

9. West Virginia

  • Phasing out tax: West Virginia is gradually eliminating Social Security taxes.
  • 2025 status: Most retirees are exempt unless they exceed income thresholds similar to federal guidelines.

States That Do NOT Tax Social Security

In contrast, 41 states and Washington, D.C. do not tax Social Security benefits at all in 2025. This includes:

  • States with no income tax: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming.
  • States with income tax but full Social Security exemption: Examples include California, Illinois, New York, and Pennsylvania.

Why This Matters for Retirees

Choosing to retire in a state that doesn’t tax Social Security can significantly stretch your retirement income. Here’s how:

  • Lower tax burden: You keep more of your monthly benefits.
  • Better cost-of-living alignment: States without Social Security tax often have other retiree-friendly policies.
  • Strategic relocation: Moving to a tax-friendly state could save thousands annually, especially for those with fixed incomes.

Federal Tax Still Applies

Even if your state doesn’t tax Social Security, the federal government might. Up to 85% of your benefits can be federally taxable depending on your “combined income” (AGI + nontaxable interest + 50% of Social Security benefits).

  • Single filers: Tax kicks in at $25,000 combined income.
  • Joint filers: Threshold is $32,000.

Final Thoughts

If you’re nearing retirement or already collecting Social Security, understanding your state’s tax policy is essential. While most states offer relief, nine still impose taxes—though often with generous exemptions. By staying informed and possibly relocating, you can preserve more of your hard-earned benefits and enjoy a more financially secure retirement.

For the latest updates, always check your state’s Department of Revenue or consult a tax professional.