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Understanding State Taxes on Social Security: A Guide for Local Retirees
For many Americans, Social Security benefits form a crucial part of their retirement income. While federal income taxes may apply if your income surpasses certain thresholds, a less widely known fact is that some states also levy their own income taxes on these benefits. Understanding which states impose these taxes, and under what conditions, is vital for local residents planning their financial future.
Here’s a look at the states where retirees might find their Social Security income subject to state-level taxation:
1. Colorado
Colorado taxes some Social Security income, though it offers exemptions. Taxpayers between 55 and 64 years old can subtract up to $20,000 of their Social Security payments from their state taxable income.
Once you reach age 65, this exemption increases, allowing you to subtract up to $24,000 in pension and annuity income from your state taxable income. Colorado maintains a flat individual income tax rate of 4.4%.
2. Connecticut
Connecticut offers a full deduction for Social Security income for many residents. Individual taxpayers with an adjusted gross income (AGI) of $75,000 or less can deduct 100% of their Social Security income from state taxable income.
For married couples filing jointly, this AGI threshold is $100,000. For those with incomes above these limits, a partial exemption applies, with state taxation of Social Security benefits not exceeding 25% of the benefits received.
Connecticut’s income tax rates range from 2% to 6.99%.
3. Minnesota
Minnesota residents can deduct at least a portion of their Social Security payments from state taxable income. Single taxpayers earning $84,490 or less are fully exempt from state Social Security taxes.
For married couples filing jointly, the full exemption applies if their income is $108,320 or less. Those whose incomes exceed these amounts will pay some state taxes on their Social Security benefits.
Minnesota’s income tax rates range from 5.35% to 9.85%.
4. Montana
In Montana, single filers with an income below $25,000 and joint filers with an income below $32,000 do not face state taxes on Social Security benefits. However, those above these income levels may owe such taxes. Montana’s income tax rates range from 4.7% to 5.9%.
5. New Mexico
New Mexico exempts most retirees from Social Security taxes. Since 2022, single seniors with less than $100,000 in income and married couples filing jointly with less than $150,000 in income have seen their Social Security benefits exempt from state income tax.
Retirees with incomes above these thresholds, however, must pay state taxes on their Social Security benefits. New Mexico’s income tax rates range from 1.7% to 5.9%.
6. Rhode Island
Rhode Island retirees who have reached full retirement age are exempt from taxes on their Social Security benefits if their income is $104,200 or less for singles, or $130,250 or less for married couples filing jointly. If your income exceeds these thresholds, your Social Security income will be subject to state taxes. Rhode Island’s income tax rates range from 3.75% to 5.99%.
7. Utah
While Utah Governor Spencer Cox previously proposed eliminating state taxes on Social Security, the state legislature opted for a more focused tax relief plan. The income thresholds for the state’s tax credit were increased.
For joint filers and heads of household, this limit was raised to $90,000. Utah’s state income tax is a flat 4.5%.
8. Vermont
Vermont offers exemptions on Social Security income for taxpayers within specific income brackets. For married couples and civil unions filing jointly, Social Security benefits are exempt from state tax for those earning $65,000 or less in adjusted gross income.
Single filers are exempt if their income is $50,000 or less. Those above these income levels will find their Social Security benefits subject to state taxes.
Vermont’s income tax rates range from 3.35% to 8.75%.
9. West Virginia
West Virginia is currently in the process of phasing out the taxation of Social Security benefits, a positive development for residents seeking financial stability in retirement. Residents earning less than $50,000 — or less than $100,000 for joint filers — currently do not owe these taxes.
For those whose incomes exceed these amounts, Social Security taxes are progressively decreasing, with the tax expected to disappear entirely by 2026. West Virginia’s income tax rates for the 2025 tax year range from 2.22% to 4.82%.
Bottom Line for Retirees
Both federal and state taxes on Social Security benefits can significantly impact your retirement budget. Understanding these rules is crucial for effective financial planning. For those aiming for a more comfortable financial situation, exploring ways to supplement Social Security income—such as part-time work or developing a side hustle—can be beneficial.
Beyond Social Security, optimizing your overall financial health is always possible. Consider these general financial strategies:
- Prioritize Debt Reduction: High-interest debt can hinder financial progress. Actively working to pay down debt, through strategies like consolidating loans or exploring debt counseling, can free up more of your income.
- Seek Additional Income: If finances are tight, supplementing your income can provide much-needed breathing room. Whether it’s a new full-time position or a flexible part-time role, extra earnings can make a substantial difference.
- Manage Expenses: Reviewing your spending, particularly your largest expenses, can uncover significant savings. For example, with auto insurance rates fluctuating, shopping for new coverage could lead to substantial reductions in your monthly bills.
Similarly, strategic use of credit cards for travel or rewards can help offset other costs.