As of 2025, only nine states in the United States will tax Social Security benefits. Recent changes in states like Missouri and Kansas have eliminated such taxes, providing relief to retirees. For those living in the nine remaining states, understanding the specific rules is crucial. Here’s a detailed look at how each state handles Social Security taxes:
1. Colorado
Colorado will continue taxing Social Security benefits in 2025, but there’s good news for lower-income residents. Retirees aged 55-64 can fully deduct federally taxed benefits if their adjusted gross income (AGI) is:
- $75,000 or less for individuals.
- $95,000 or less for married couples filing jointly.
This deduction reduces the financial burden for middle-income retirees.
2. Connecticut
Connecticut offers a similar exemption for lower-income residents:
- Social Security benefits are tax-free for single filers and married individuals filing separately with an AGI below $75,000.
- Married couples filing jointly are exempt if their AGI is under $100,000.
Above these income levels, Social Security benefits are subject to state taxes.
3. Minnesota
Minnesota also provides tax exemptions based on income:
- Individuals with an AGI below $82,190 are exempt.
- Married couples filing jointly avoid taxes if their AGI is less than $105,380.
For those above these thresholds, benefits will be taxed.
4. Montana
Montana taxes Social Security benefits but exempts residents with lower incomes:
- Single filers with an AGI under $25,000 are exempt.
- Married couples filing jointly avoid taxes if their AGI is below $32,000.
Higher-income residents will see their Social Security benefits taxed fully at the state level.
5. New Mexico
New Mexico has implemented more generous policies for retirees:
- Social Security benefits are tax-free for individuals earning less than $100,000 annually.
- Married couples are exempt if their combined income is below $150,000.
This policy makes New Mexico more favorable for retirees with moderate incomes.
6. Rhode Island
Rhode Island allows an exemption for many residents:
- Individuals with an AGI under $88,950 don’t pay state taxes on Social Security benefits.
- Married couples filing jointly are exempt if their AGI is below $111,200.
This policy helps reduce the tax burden for many retirees in the state.
7. Utah
Utah provides tax relief for lower-income retirees:
- Single filers earning less than $30,000 annually are exempt.
- Married couples avoid taxes if their combined income is below $50,000.
Retirees with higher incomes will still have their benefits taxed.
8. Vermont
Vermont’s tax policy exempts lower-income residents from Social Security taxes:
- Individuals with incomes below $50,000 are exempt.
- Married couples qualify for the exemption if their income is under $65,000.
Above these income levels, benefits are subject to state taxation.
9. West Virginia
West Virginia is in the process of phasing out its Social Security taxes altogether. Currently:
- Single filers earning less than $50,000 annually are exempt.
- Married couples filing jointly are exempt if their income is below $100,000.
The phase-out plan will reduce taxes by 35% in 2024 and 65% in 2025, with no taxes on Social Security benefits by 2026.
What This Means for Retirees
Understanding these tax rules is essential for retirees planning their finances. If you live in one of these nine states and qualify for an exemption, you could save significantly on taxes. For those who don’t qualify, careful financial planning may help reduce your overall tax burden.
As more states move to reduce or eliminate Social Security taxes, it’s worth keeping an eye on potential changes in the coming years.
This guide ensures you stay informed about how your Social Security benefits will be taxed in 2025. Let me know if you’d like help tailoring this content further!
