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The title of this article clued you in to some bad news: Some Americans may have to fork over a portion of their Social Security benefits due to taxation. There’s a lot of good news despite that, though. For one thing, obviously, most states these days do not tax Social Security benefits.
Here’s a closer look at which states make up the nine that do, along with some other important information to know about Social Security and taxes.
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The 9 states that tax residents’ Social Security benefits
First, here are the nine states:
- Colorado
- Connecticut
- Minnesota
- Montana
- New Mexico
- Rhode Island
- Utah
- Vermont
- West Virginia
Before you start looking into relocating in retirement, read on. If you live in one of these states — and each of them has a lot to recommend it — your Social Security benefits actually may not be taxed much or at all. That’s because each state has a different policy, and some have age- or income-based exemptions.
For example, Coloradans aged 65 and older are exempt from taxes on their Social Security benefits. And a new law is exempting those aged 55 to 64 if their adjusted gross incomes are below certain levels, beginning with the 2025 tax year.
Here’s more good news: The list of states that tax Social Security benefits has been shrinking in recent years — and it may continue doing so. West Virginia, for example, is phasing that tax out, and it will be gone for the 2026 tax year.
One entity isn’t eliminating taxes on Social Security
Sadly, though, no matter what state you live in, Uncle Sam has his hand out, ready to tax your Social Security benefits. Specifically, the federal government may tax up to 85% of your benefits. Here’s the scoop:
|
Filing As |
Combined Income* |
Percentage of Benefits Taxable |
|---|---|---|
|
Single individual |
Between $25,000 and $34,000 |
Up to 50% |
|
Married, filing jointly |
Between $32,000 and $44,000 |
Up to 50% |
|
Single individual |
More Than $34,000 |
Up to 85% |
|
Married, filing jointly |
More Than $44,000 |
Up to 85% |
Data source: Social Security Administration.
*Your combined income is your adjusted gross income (AGI) plus nontaxable interest plus half of your Social Security benefits.
It’s important to understand that the table above does not show a tax rate of 50% or 85% — you won’t see 85% of your benefits carted away in taxes. Instead, those are the portions of your benefits that might end up taxed, depending on your income.
There are efforts underway to stop the federal taxation of Social Security, but whether and when that happens remains to be seen. (If you like that idea, consider letting your representatives in Washington know.)
It’s smart to learn about Social Security well before you retire and need it. It’s also critical to develop a thorough retirement plan. Take some time to estimate how much income you’ll need in retirement and how you’ll get it. Social Security isn’t likely to provide enough income, so explore and develop other retirement income sources.
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