Nine States That Tax Social Security Benefits in 2025: Social Security benefits are a lifeline for millions of Americans, providing steady income during retirement, for survivors, and for those with disabilities. While the federal government taxes Social Security depending on your total income, retirees also need to consider state-level rules. In 2025, nine U.S. states still levy taxes on Social Security benefits, although each state has its own thresholds and exemptions.
At the federal level, Social Security becomes taxable once your combined income crosses set thresholds. That includes retirement, survivor, and disability benefits.
Some states offer full exemptions for older taxpayers or for those with lower incomes, while others apply partial taxation. For example, a couple in Vermont with an income above $65,000 may owe some state taxes, while single filers with lower incomes may qualify for full exemptions. Retirees can also reduce taxable income by using tools like Roth IRAs or health savings accounts (HSAs).
Knowing which states tax Social Security and how much can help retirees plan withdrawals, manage tax bills, and maximize their retirement income. Here’s a detailed look at the nine states that tax Social Security and the income rules that apply in each.
Which states tax Social Security benefits?
Nine states currently tax Social Security: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Vermont, and West Virginia. Each has different rules based on age and income.
- Colorado: Taxpayers 65+ can deduct all benefits. Ages 55–64 can fully deduct if AGI ≤ $75,000 (individual) or $95,000 (couple). Higher earners can deduct up to $20,000.
- Connecticut: Individuals with AGI ≤ $75,000 and couples ≤ $100,000 can fully deduct benefits. Up to 25% of benefits taxed above these limits.
- Minnesota: Married filers ≤ $108,320, singles ≤ $84,490, and married filing separately ≤ $54,160 fully exempt. Partial taxation applies above these thresholds.
- Montana: Single filers < $25,000 and joint filers < $32,000 can fully deduct Social Security. Partial exemptions for higher incomes.
- New Mexico: Single filers < $100,000, couples filing jointly < $150,000, and married filing separately < $75,000 are fully exempt. Income above limits may be taxed.
- Rhode Island: Full exemption for married couples ≤ $130,250, singles ≤ $104,200, and married filing separately ≤ $104,225. Partial taxation above thresholds.
- Vermont: Married couples ≤ $65,000 and other filers ≤ $50,000 fully exempt. Partial deductions apply for incomes slightly above these limits.
- West Virginia: For 2025, AGI > $50,000 (single) or > $100,000 (joint) can subtract 65% of benefits. Full exemption begins in 2026.
- Other states: Rules vary, but most consider age, filing status, and total income to determine exemptions and taxable amounts.
Other states have similar rules with income thresholds determining exemptions and taxable amounts.
States generally tax Social Security in one of three ways:
- Age-based exemptions: Older taxpayers may qualify for full exemptions, as in Colorado.
- Income-based thresholds: States like New Mexico exempt benefits for those below certain income levels but tax higher earners.
- Partial deductions: Some states allow a portion of Social Security to be subtracted from taxable income.
Taxable income usually includes Social Security, but many states offer a subtraction or exemption depending on your AGI and filing status.
Strategies to reduce taxes on Social Security
Federal taxation starts once combined income exceeds $25,000 for single filers and $32,000 for joint filers. State rules layer on top of that, often at higher income levels.
Retirees with income below $75,000 to $100,000 typically avoid state taxes entirely in most taxing states. Higher-income retirees face gradual phase-outs rather than sudden tax hits.
Retirees can minimize state and federal taxes on Social Security by managing taxable income. Roth IRA withdrawals are tax-free and do not count toward AGI. Similarly, funds withdrawn from health savings accounts (HSAs) for qualified medical expenses are not taxed. Keeping detailed receipts for HSA expenses can also help reduce taxable income.
Another option is advocacy: several states have considered legislation to eliminate Social Security taxes. Nationally, there is a trend toward full exemptions, reflecting growing recognition that taxing retirement income can affect financial security for older Americans.
Understanding Social Security taxation is critical for retirement planning. Income thresholds, age, and filing status determine whether and how much your benefits are taxed. Retirees should check their state rules each year, consider tax-efficient withdrawals, and explore exemptions. With careful planning, it is possible to maximize Social Security income while minimizing state and federal tax obligations.
FAQs:
Q: Which states tax Social Security benefits in 2025? A: Nine states tax Social Security this year: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Vermont, and West Virginia. Rules differ by age and income. Exemptions often apply for lower earners or retirees above 65. Thresholds vary from $25,000 to over $100,000 depending on filing status.
Q: How can retirees reduce state taxes on Social Security income?
A: Retirees can lower taxable income by using Roth IRA withdrawals or HSA funds for qualified expenses. Some states allow deductions or partial exemptions based on income. Planning withdrawals strategically can minimize both federal and state Social Security taxes. Consulting state-specific rules is essential for accurate tax planning.