Retirement should be about enjoying the fruits of your hard work—not worrying about taxes on your Social Security benefits. But depending on where you live, your benefits might be taxed at the state level.
While most states don’t tax Social Security, nine still do in 2025. And the rules vary—some states have income-based exemptions, while others tax benefits like regular income.
Knowing how your state handles Social Security taxes can help you plan smarter, reduce your tax bill, and keep more of your retirement income. Let’s break it down.
How Social Security Benefits Are Taxed
At the federal level, Social Security benefits are taxable based on your provisional income (your AGI + tax-exempt interest + 50% of your Social Security benefits):
- Single filers: If your provisional income exceeds $25,000, up to 85% of your benefits may be taxed.
- Married filing jointly: If your provisional income is over $32,000, you could also pay taxes on up to 85% of your benefits.
At the state level, it’s a different story. Most states don’t tax Social Security benefits, but the nine that do have unique rules. Some follow federal guidelines, while others offer exemptions or credits to retirees.
Let’s look at which states still tax Social Security in 2025—and what that means for you.
The Nine States That Tax Social Security Benefits
If you live in any of these nine states, your Social Security benefits could be subject to state taxes:
- Colorado
- Connecticut
- Minnesota
- Montana
- New Mexico
- Rhode Island
- Utah
- Vermont
- West Virginia
Each state applies different exemptions, income thresholds, and tax rates. Some are gradually phasing out taxes on benefits, while others have fixed rules.
Here’s how each state taxes Social Security benefits in 2025.
a. Colorado: A Flat Tax with Retirement Exemptions
If you’re retiring in Colorado, here’s the deal—you’ll pay a flat 4.25% tax, but you might not owe anything on your Social Security benefits.
The state offers generous exemptions for retirees:
- If you’re 65 or older, you can deduct up to $24,000 of your retirement income (including Social Security).
- If you’re under 65, the exemption drops to $20,000.
So, what does this mean for you?
If your Social Security benefits fall within the exemption limit, you won’t pay state taxes on them. But if your benefits exceed that amount, the rest gets taxed at 4.25%.
Key takeaway: If Social Security is your primary source of income, you may not owe any taxes in Colorado. But if you have other taxable income, you might see a tax bill.
b. Connecticut: Income-Based Exemptions
In Connecticut, whether you pay taxes on Social Security depends entirely on your Adjusted Gross Income (AGI).
Here’s how it works:
No tax if your AGI is below:
- $75,000 (Single filers)
- $100,000 (Married filing jointly)
If your income is above these limits, 25% of your Social Security benefits become taxable.
This makes Connecticut one of the few states with a middle-ground approach—some retirees pay nothing, while higher earners get taxed on a portion of their benefits.
Key takeaway: If you keep your AGI below the threshold, you can avoid state taxes on Social Security. But if you have additional retirement income pushing you past the limit, be prepared to owe taxes on a portion of your benefits.
c. Minnesota: A Tax on Benefits with Some Relief
If you’re retiring in Minnesota, Social Security benefits are taxed, but there’s some relief depending on your income.
- The state allows a Social Security subtraction, reducing your taxable benefits:
- Single filers: Can subtract up to $4,500.
- Married filing jointly: Can subtract up to $9,000.
- If your income is above a certain threshold, this subtraction phases out. In that case, federal taxation rules apply, and you could pay taxes on up to 85% of your benefits at Minnesota’s standard tax rates.
Minnesota’s tax system is one of the less friendly ones for retirees, but if your income is within the subtraction limits, you’ll pay less in Social Security taxes. If not, you might want to look at other tax-saving strategies.
d. Montana: Federal Tax Rules Apply with Limited Deductions
Montana doesn’t offer a separate exemption for Social Security benefits. Instead, it follows the federal taxation model, meaning up to 85% of your benefits could be taxed depending on your income.
Here’s what you should know:
- If your provisional income is low, you might owe little to no tax on benefits.
- Tax rate: Benefits taxed as regular income, with rates going up to 5.9%.
- Deductions for retirees: If you’re 65 or older, you can deduct up to $5,500 from your retirement income, which might slightly reduce your tax bill.
Montana is one of the few states that hasn’t phased out Social Security taxes, making it a bit tougher for retirees on a fixed income. However, strategic tax planning can help reduce what you owe.
e. New Mexico: High-Income Filers, Take Note
New Mexico does tax Social Security benefits, but there’s good news—many retirees won’t have to pay.
If your adjusted gross income (AGI) is below:
- $100,000 (Single filers)
- $150,000 (Married filing jointly)
Then your benefits are exempt from state taxes.
But if your income exceeds these thresholds, your Social Security benefits are fully taxable. New Mexico doesn’t offer deductions or credits to soften the blow, so if you land above the limit, expect to pay state income tax on your benefits just like regular earnings.
What This Means for You
- If your income stays below the exemption limit, your benefits won’t be taxed.
- If you’re close to the threshold, consider managing your withdrawals from IRAs or 401(k)s to stay under.
- High-income retirees in New Mexico may want to consult a tax professional for strategies to reduce taxable income.
f. Rhode Island: Income-Based Exemptions for Retirees
Rhode Island also taxes Social Security benefits, but it offers exemptions based on AGI.
If your AGI is below:
- $95,800 (Single filers)
- $119,750 (Married filing jointly)
Your benefits won’t be taxed at all.
If your income exceeds these limits, your benefits are subject to Rhode Island’s state tax—which can range from 3.75% to 5.99% depending on your total income.
What This Means for You
- If you qualify for the exemption, you won’t owe state taxes on Social Security.
- If your AGI is close to the limit, it’s worth reviewing your retirement income strategy to keep more of your benefits.
- Rhode Island’s tax rates are relatively moderate, but small income shifts could mean big tax savings.
g. Utah: A Flat Tax with Some Relief
If you’re retiring in Utah, you’ll face a flat state income tax of 4.55%—and yes, that includes your Social Security benefits. But don’t worry, Utah offers a Social Security benefits credit to help offset the tax.
How It Works:
- The full credit is available if your income is below $45,000 (single) or $75,000 (married filing jointly).
- If you earn more, the credit phases out gradually.
- There’s also a $450 retirement tax credit, which might help further.
What This Means for You:
If your income stays under the threshold, you might not pay any tax on Social Security benefits at all. But if you’re earning more, expect some of your benefits to be taxed at the 4.55% rate.
Pro tip: Managing your taxable income can help you qualify for the credit and reduce your tax bill in retirement.
h. Vermont: High Taxes, but Some Relief
Vermont isn’t the most tax-friendly state for retirees—it taxes Social Security benefits if your income exceeds certain limits. But if you fall below those limits, you might qualify for a full or partial exemption.
Who Pays Social Security Taxes in Vermont?
- Single filers earning under $50,000: No tax on benefits.
- Married filers under $65,000: No tax on benefits.
- Earn more than these limits? You’ll get a partial exemption up to a certain point.
What This Means for You:
If you’re on a moderate retirement income, you might escape Social Security taxes altogether. But if your income is higher, Vermont follows federal taxation rules, meaning up to 85% of your benefits could be taxed at state rates.
Pro tip: If you’re looking for a tax-friendly retirement, Vermont might not be the best option—but smart income planning can help you keep more of your Social Security.
i. West Virginia
If you’re living in West Virginia, there’s good news on the horizon when it comes to Social Security taxes. The state is gradually phasing out taxes on Social Security benefits, which means retirees will see some relief in the coming years.
Here’s how it works in 2025:
- 65% Exemption: In 2025, 65% of your Social Security benefits will be exempt from state taxes. This means a significant chunk of your retirement income won’t be taxed.
- 100% Exemption in 2026: Starting in 2026, West Virginia will fully eliminate taxes on Social Security benefits, allowing you to keep all of your Social Security income tax-free.
So, if you’re planning your retirement and living in West Virginia, the next couple of years could be a great time to benefit from this gradual phase-out.
Take note: While this exemption makes West Virginia more tax-friendly for retirees, it’s important to keep track of your income and filing status. Make sure you’re aware of any additional taxes you might face on other retirement income.
With the state’s commitment to reducing Social Security taxes, it’s a good time to review your financial plan and make sure you’re optimizing your tax savings. It won’t be long before all of your Social Security benefits will be completely tax-free.
Bottom Line
Understanding how your state taxes Social Security benefits is key to maximizing your retirement income. While nine states still impose taxes on Social Security, many offer exemptions or deductions based on income levels. By staying informed about state-specific rules, you can better plan your retirement and minimize tax burdens.
Consider relocating to a tax-friendly state or work with a tax advisor to explore your options. The more proactive you are, the more you can protect your hard-earned benefits and enjoy a financially secure retirement.
Take action today and safeguard your retirement funds
Also Read – Your 2025 Tax Strategy: CPA Near Me for Taxes in Spring Lake, Monmouth