While most states in the U.S. exempt Social Security benefits from state income taxes, a few still tax these benefits either partially or fully. Understanding where these taxes apply is essential for retirees planning their finances. In 2025, only nine states will tax Social Security benefits, with some offering exemptions or deductions based on income or age thresholds. Here’s an updated guide to the states taxing Social Security benefits, their rules, and what retirees need to know.
States Taxing Social Security Benefits in 2025
As of 2025, the following states will tax Social Security benefits:
| State | Tax Rules |
|---|---|
| Colorado | Offers exemptions for individuals 55+ with income under $75,000 (or $95,000 for couples). |
| Connecticut | Exempts benefits for individuals earning less than $75,000 or couples under $100,000. |
| Minnesota | Offers income-based deductions; taxes higher earners fully. |
| Montana | Taxes all Social Security income, with no specific exemptions. |
| New Mexico | Implements income-based exemptions, phasing out taxes for middle-income earners. |
| Rhode Island | Exempts benefits for individuals earning less than $86,350 or couples under $107,950. |
| Utah | Offers tax credits to reduce liability for moderate-income retirees. |
| Vermont | Provides partial exemptions based on adjusted gross income thresholds. |
| West Virginia | Phasing out taxes; no taxation by 2026. |
Changes to Social Security Taxes in 2025
- West Virginia: The state is in the process of eliminating Social Security taxes completely by 2026.
- Missouri and Nebraska: These states recently stopped taxing Social Security benefits in 2024.
- Kansas: No longer taxes Social Security starting in 2025, thanks to new legislation passed in 2024.
These changes highlight a growing trend among states to reduce or eliminate taxes on Social Security income, providing relief for retirees.
States That Do Not Tax Social Security in 2025
In 2025, 41 states and Washington, D.C., will not tax Social Security benefits, ensuring significant savings for retirees. These states include:
- Alabama, Alaska, Arizona, Arkansas, California, Delaware, Florida, Georgia, Hawaii, Idaho
- Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi
- Missouri, Nebraska, Nevada, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio
- Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Virginia, Washington, Wisconsin, Wyoming
How to Minimize Taxes on Social Security Benefits
Even in states that tax Social Security, retirees may reduce their tax liability through strategies such as:
- Staying Below Income Thresholds: Many states offer deductions or exemptions for retirees with lower adjusted gross incomes (AGI).
- Relocating: Moving to a state that does not tax Social Security can save retirees thousands annually.
- Using Tax Credits: States like Utah offer credits that effectively lower the tax burden for retirees.
- Leveraging Tax-Deferred Accounts: Distributing withdrawals from Roth IRAs or tax-exempt accounts can help keep income levels below taxable thresholds.
FAQs
1. Why do some states still tax Social Security benefits?
These taxes help states fund essential services, though many have introduced exemptions to ease the financial burden on retirees.
2. Are federal Social Security taxes separate from state taxes?
Yes. At the federal level, up to 85% of Social Security benefits may be taxed based on income, regardless of state policies.
3. What are the savings from living in a state that doesn’t tax Social Security?
Retirees can save thousands annually. For example, a 5% state tax on $30,000 in Social Security benefits would equate to $1,500 in annual savings.
4. Which state will stop taxing Social Security next?
West Virginia will fully phase out Social Security taxes by 2026.
Conclusion
In 2025, only nine states will continue to tax Social Security benefits, with most offering deductions or credits for retirees with lower incomes. States like Missouri, Nebraska, and Kansas have eliminated these taxes recently, and others may follow. Understanding the tax landscape is crucial for retirees looking to maximize their income and reduce expenses.