Many retirees assume that once they start receiving Social Security benefits, those payments are completely protected from state taxes. In most of the country, that’s true. However, some states still tax at least a portion of Social Security income, potentially reducing the amount retirees keep each month. While the list of states taxing Social Security has shrunk significantly in recent years, it’s still important to know which states continue to impose these taxes and how the rules work. Here are eight states that still tax your Social Security in some way.
1. Colorado
Colorado remains one of the states that taxes Social Security benefits under certain circumstances. The good news is that many older residents qualify for deductions that reduce or eliminate the tax burden entirely. Income levels, age, and filing status all play a role in determining whether benefits are taxed. Higher-income retirees may still see some portion of their benefits included in taxable income. Before assuming you’ll owe taxes, it’s worth reviewing the state’s current exemptions and deductions.
2. Connecticut
Connecticut taxes Social Security benefits for some retirees whose income exceeds specific thresholds. Many middle-income and lower-income seniors are exempt from paying state tax on their benefits. The state’s rules are based largely on adjusted gross income and filing status. As a result, two retirees receiving the same Social Security benefit may face very different tax outcomes. Understanding where your income falls can make a significant difference when planning retirement withdrawals.
3. Minnesota
Minnesota continues to tax federally taxable Social Security benefits, although recent changes have provided relief for many retirees. The state offers a subtraction that reduces taxation for individuals below certain income thresholds. Higher-income retirees may still owe state taxes on part of their benefits. Minnesota’s approach is more nuanced than a simple yes-or-no tax policy. Retirees should review annual tax updates because exemption amounts and thresholds can change over time.
4. Montana
Montana has long been considered one of the less favorable states when it comes to Social Security taxation. The state generally follows federal taxation rules, although income thresholds determine who is affected. Retirees with additional pension, investment, or retirement account income may be more likely to owe state taxes. Because Montana’s calculations can be complex, many seniors benefit from reviewing their situation with a tax professional. Understanding the rules beforehand can prevent surprises at tax time.
5. New Mexico
New Mexico includes Social Security benefits in taxable income, but many retirees qualify for deductions that significantly reduce the impact. The state has implemented several tax-relief measures aimed at helping older residents. Depending on income levels, some retirees may pay little or no state tax on their benefits. Others with higher earnings from investments or retirement accounts may still face taxation. The key factor is not simply where you live but how much total income you receive.
6. Rhode Island
Rhode Island continues to tax Social Security benefits for some residents, though exemptions are available. Age and income thresholds determine eligibility for relief. Many retirees with moderate incomes avoid paying state taxes on their benefits altogether. Those with higher household income may still see part of their Social Security subject to taxation. Reviewing Rhode Island’s exemption rules annually is important because retirement income planning can affect tax liability.
7. Utah
Utah taxes Social Security benefits using a system that generally mirrors federal taxation rules. However, the state also offers tax credits designed to reduce the burden for many retirees. These credits phase out at higher income levels, meaning wealthier retirees may still owe taxes. For some households, strategic income planning can help maximize available credits. Understanding these rules can make Utah more retirement-friendly than its reputation sometimes suggests.
8. Vermont
Vermont remains on the list of states that tax Social Security benefits, but exemptions are available for many lower-income retirees. Income thresholds determine whether benefits are fully exempt, partially exempt, or fully taxable. As with many of the remaining taxing states, Vermont has gradually expanded relief programs over time. The result is that many retirees pay far less than they might expect. Still, higher-income households should account for these taxes when creating a retirement budget.
Why the List Keeps Getting Shorter
A decade ago, far more states taxed Social Security benefits than they do today. Lawmakers across the country have increasingly recognized that many retirees rely heavily on Social Security to cover basic living expenses. As a result, several states have repealed or phased out these taxes entirely. Today, only eight states continue taxing at least some Social Security benefits, with most offering significant exemptions based on age or income. The trend suggests that Social Security taxation may continue to disappear in additional states over the coming years.
Does your state tax Social Security benefits, and has it affected your retirement plans? Share your experience in the comments below.
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