Additional Coverage:
Most states do not tax Social Security benefits, but a handful still do-and that could significantly impact your retirement income in 2026. For residents in these states, understanding the tax rules is crucial, as it may influence your financial readiness and monthly budget.
Here’s a closer look at the states that tax Social Security and what you can expect in 2026, including income thresholds and tax rates:
1. Colorado
Colorado has made Social Security largely exempt from state income tax starting in 2025, with rules continuing into 2026.
- Age 65 and older: 100% of federally taxable Social Security benefits are exempt.
- Ages 55-64: Full exemption if federal adjusted gross income (AGI) is under $75,000 (single) or $95,000 (married filing jointly).
- Higher incomes in this age group can still exclude up to $20,000 of benefits.
- Under 55: No special exemption applies.
Remaining income is taxed at a flat rate of 4.4%.
2. Connecticut
While Connecticut still technically taxes Social Security, most retirees pay nothing in practice. In 2026, if your federal AGI is below $75,000 (single) or $100,000 (joint), your Social Security benefits are tax-free at the state level.
Above these thresholds, up to 25% of your benefits may be taxable at rates up to about 6.99%.
3. Montana
Montana taxes Social Security as ordinary income but offers a modest exemption for seniors. Taxpayers 65 or older can subtract $5,660 from income in 2026, which can offset taxable benefits.
Income tax rates range from 4.7% to 5.65%, meaning many older retirees pay only minimal tax on Social Security.
4. New Mexico
New Mexico provides one of the most generous exemptions. In 2026, Social Security is fully exempt if income is under $100,000 (single) or $150,000 (married filing jointly).
Above these thresholds, taxable benefits are taxed at rates between 1.7% and 5.9%.
5. Rhode Island
Exemptions are available only for retirees at full retirement age (usually 66 or 67) who meet income limits. For 2025, federal AGI must be below roughly $107,000 (single) or $133,750 (joint) to fully exclude Social Security benefits.
Above these amounts, benefits are taxed up to 5.99%.
6. Vermont
Vermont exempts all Social Security benefits for incomes below $65,000 (single) or $75,000 (joint) in 2026. Above those levels, the exemption phases out, and higher earners may pay up to 8.75% on taxable benefits.
7. Utah
Utah taxes Social Security at a 4.65% flat rate but offers a refundable Social Security Benefits Credit that often cancels out the tax for most retirees with incomes below certain thresholds ($45,000 single, $75,000 joint).
8. Minnesota
Minnesota taxes Social Security only if it’s federally taxable, but with generous exemptions. For 2026, benefits are fully exempt if AGI is under $108,320 (joint) or $84,490 (single).
Above these limits, the exemption phases out gradually, and taxable amounts are subject to rates up to 9.85%.
Good News: West Virginia
Starting in 2026, West Virginia will fully exempt Social Security benefits from state income tax, regardless of income, completing a multi-year phase-out.
Bottom Line
Although eight states still tax Social Security to some degree, many retirees pay little or nothing due to income-based exemptions.
Because rules can be complex and subject to change, it’s important to review your state’s current tax laws annually. Proactive planning helps ensure you stay on track for a comfortable, stress-free retirement.
Money Tips for Everyone
No matter your financial situation, there are always ways to improve your money management and grow your wealth:
- Increase your income: Consider side jobs or income streams that fit your lifestyle.
- Grow what you have: Start early and leverage compound interest; consult a professional to create a retirement plan.
- Take advantage of savings opportunities: Use senior discounts, shop around for better car insurance rates, and avoid hidden financial traps.
Staying informed and making smart financial choices today can set you up for a brighter retirement tomorrow.