As of December 2025, nine states still tax Social Security benefits based on age and income, making them the exception in a country where most states have ended or reduced taxation on retirement income. While the federal government continues to tax up to 85% of Social Security benefits for higher-income retirees, these nine states also impose their own tax, depending on residents’ income levels or age brackets.
For millions of retirees living on fixed incomes, these state-level taxes can significantly affect take-home benefits, influencing where they choose to live in retirement.
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The Current Landscape of Social Security Taxation
Across the U.S., Social Security benefits are largely exempt from state income taxes. Out of all 50 states, 41 either have no income tax or specifically exclude Social Security from taxable income. However, in 2025, the following nine states still tax benefits under certain conditions tied to earnings or age:
| State | Tax Applies To | Details/Thresholds (2025) |
|---|---|---|
| Colorado | Based on age | Exemption up to $24,000 for taxpayers 65+; partial tax for lower ages. |
| Connecticut | Based on income | Benefits excluded if income is under $75,000 (single) or $100,000 (joint). |
| Kansas | Based on income | Exemption if federal AGI ≤ $75,000; full tax if above. |
| Minnesota | Based on income | Partial state subtraction; taxes up to 85% depending on AGI. |
| Montana | Based on income | Sliding scale reduction; full tax for higher-income filers. |
| New Mexico | Based on income and age | Tax reductions available for seniors 65+ with income under $100,000. |
| Rhode Island | Based on age and income | Exemption for 65+ if income < $118,750 (single) or $148,050 (joint). |
| Utah | Based on income | Tax credit phases out for incomes above $45,000 (single) or $75,000 (joint). |
| Vermont | Based on income | Partial or full exemption for incomes below $50,000 (single) or $65,000 (joint). |
While all nine states tax benefits to some extent, each uses income thresholds and age-based deductions to lessen the burden for low- or middle-income retirees.
Federal vs. State Social Security Tax Rules
At the federal level, Social Security benefits may be taxed depending on “combined income”—your adjusted gross income (AGI) plus nontaxable interest and half of your Social Security benefits.
Federal taxation thresholds remain unchanged in 2025:
- Single filers: Up to 50% taxed if income is between $25,000 and $34,000; up to 85% taxed if above $34,000.
- Married filing jointly: Up to 50% taxed if combined income is between $32,000 and $44,000; up to 85% taxed if above $44,000.
States that also tax Social Security use their own definitions and income limits, creating an uneven map of retirement tax policy across the nation.
Why Only Nine States Still Tax Benefits
Over the past decade, many states have moved away from taxing Social Security income. The shift reflects growing recognition of inflation, longer lifespans, and the increased dependence of retirees on fixed benefits.
Since 2018, states like Nebraska, Missouri, and West Virginia have fully phased out their Social Security taxes. By 2025, only nine states maintain partial taxation, largely because of budgetary constraints or longstanding tax codes that tie state income calculations to federal returns.
For example:
- Minnesota and Vermont cite fiscal balance as reasons for continuing partial taxation.
- New Mexico and Rhode Island have expanded exemptions but not yet removed taxation entirely.
- Colorado and Utah have restructured their systems to provide targeted credits rather than blanket exemptions.
These states argue that income-based taxation ensures fairness by exempting lower-income retirees while collecting revenue from higher earners.
The Role of Age and Income Thresholds
The nine states that still tax Social Security benefits use a combination of income thresholds and age-based rules to determine who pays.
- Age-based exemptions: Older retirees, usually those 65 and older, receive higher deduction limits or full exclusions.
- Income-based thresholds: Retirees below a specific AGI limit qualify for full or partial exemptions.
This dual approach aims to protect lower-income seniors while maintaining state revenue streams from wealthier residents.
Here’s how it works in practice:
- A 70-year-old retiree in Colorado with $60,000 in total income may pay no tax on benefits.
- A 62-year-old in the same state with $80,000 in income could owe partial state tax.
The complexity varies widely between states, which often adjust exemption levels annually for inflation.
How These Taxes Affect Retirees
For retirees living on Social Security alone, these state taxes may have little or no impact. However, those with additional income—such as pensions, investments, or part-time earnings—can face hundreds or even thousands of dollars in annual taxes depending on where they live.
This reality has driven many retirees to relocate to tax-friendly states. Florida, Texas, and Tennessee—none of which tax Social Security—have all seen increased migration among seniors in recent years.
Meanwhile, retirees remaining in states like Minnesota or Vermont often weigh the higher cost of living against the benefits of proximity to family and healthcare.
Ongoing Legislative Changes in 2025
Several of the nine states still taxing benefits are currently debating reforms:
- Minnesota: Lawmakers have discussed phasing out Social Security taxation entirely by 2026. A partial repeal was passed in 2023, reducing the number of taxpayers affected.
- New Mexico: The state expanded its exemption in 2024 but continues to review additional tax relief measures for middle-income seniors.
- Colorado: Proposals in 2025 aim to increase the age-based deduction to offset inflation.
- Rhode Island: Budget committees are reviewing new income thresholds to reduce the number of seniors paying tax.
While complete elimination remains politically divided in some states, most are trending toward reducing or phasing out the taxation of retirement income altogether.
Comparing State Approaches
To help readers understand how these states differ, here’s a simplified comparison:
| State | No Tax for Low-Income Seniors? | Automatic Inflation Adjustment? | Phasing Out Taxation? |
|---|---|---|---|
| Colorado | Yes | Yes | Under review |
| Connecticut | Yes | Yes | No current plans |
| Kansas | Yes | No | Stable policy |
| Minnesota | Partial | Yes | Gradual phase-out |
| Montana | Partial | No | None announced |
| New Mexico | Yes | Yes | Potential phase-out |
| Rhode Island | Yes | Yes | Under review |
| Utah | Yes | Yes | Ongoing credits expansion |
| Vermont | Yes | Yes | Reviewing long-term repeal |
This table illustrates that while taxation persists, many states are adapting to inflation and public pressure to make systems fairer.
Why This Issue Matters
Social Security remains the largest source of income for many retirees. The average monthly benefit in 2025 stands at roughly $1,910, or about $22,920 per year. Any state tax on that income, even if modest, can affect a retiree’s budget for essentials like housing, healthcare, and groceries.
For retirees living on fixed incomes, even small state-level taxes can reduce their quality of life. Many financial advisors recommend retirees review not only federal rules but also state tax structures before deciding where to settle.
States That Do Not Tax Social Security
To put the nine states in perspective, here’s a quick look at the 41 states that fully exempt Social Security income:
- States with no income tax: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, New Hampshire (taxing only interest/dividends).
- States that exclude Social Security from taxation: Alabama, Arizona, Arkansas, California, Delaware, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Nebraska, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Virginia, West Virginia, Wisconsin, and others that provide 100% exclusion.
These states collectively house the majority of U.S. retirees, highlighting the growing preference for tax-free retirement income.
The Future of Social Security Taxation
Looking forward, experts anticipate more states will eliminate taxes on Social Security benefits in the next few years. With inflation adjustments and growing senior populations, maintaining such taxes could become politically unpopular and economically impractical.
At the federal level, discussions continue about raising or eliminating the taxation thresholds first set in 1983—levels that have never been adjusted for inflation. Until that changes, both federal and state taxes will continue to impact middle- and upper-income retirees.
Key Takeaways for Retirees
If you live in or plan to move to one of the nine states that still tax benefits, consider the following:
- Review your total retirement income (including pensions and investments).
- Check your state’s specific income threshold for exemptions each tax year.
- Factor state taxes into relocation decisions—the difference can equal several thousand dollars annually.
- Consult a tax professional to ensure compliance and identify available deductions.
Understanding these details ensures you maximize your retirement income while avoiding surprises at tax time.
While 41 states have removed taxes on retirement income, nine states still tax Social Security benefits based on age and income. For retirees in those areas, staying informed about evolving tax rules can help protect financial stability and ensure a more comfortable retirement.
Have you experienced the impact of state Social Security taxes where you live? Share your thoughts in the comments below.