Retirees Beware: Social Security Checks Are Taxed in These 9 States!

Social Security benefits serve as a financial lifeline for millions of retirees across the United States. However, many retirees are shocked to discover that some states tax their Social Security income. While the federal government taxes benefits based on income levels, nine U.S. states also impose their own taxes on Social Security benefits. This can significantly impact retirees’ finances, especially those living on fixed incomes.

If you’re planning for retirement or considering relocating, it’s essential to understand how these state taxes work—and how you can potentially reduce their impact.

Retirees Beware

Check official state tax websites for up-to-date regulations.

Understanding how Social Security benefits are taxed is crucial for retirees. While only nine states tax Social Security income, each has its own rules and exemptions. Planning ahead, keeping your income under exemption limits, or relocating can help you minimize your tax burden.

If you’re unsure how Social Security taxes affect you, consult a financial advisor or visit your state’s official tax website for details.

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Retirees Beware: Why Do Some States Tax Social Security Benefits?

The taxation of Social Security benefits at the state level is largely a revenue decision. While some states fully exempt Social Security income to attract retirees, others see it as a taxable income source—especially those with significant budgetary needs.

These states generally apply Social Security taxes similar to federal taxation rules, meaning:

1. If your total income (including benefits) is below a set threshold, your benefits may not be taxed at all.
2. Higher-income retirees could see a portion of their benefits taxed at their state’s income tax rate.
3. Some states offer deductions, credits, or exemptions to minimize the impact on low-to-middle-income retirees.

Now, let’s break down each of the nine states that tax Social Security and what retirees need to know

Retirees Beware Colorado: Tax Breaks for Seniors

Colorado taxes Social Security benefits as part of state income. However, retirees can deduct benefits as follows:

1. 65 and older: Full deduction of federally taxed benefits.
2. 55 to 64: Partial deduction available, depending on income.

Tip: If you’re a high-income retiree in Colorado, you may still owe taxes on a portion of your benefits.

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Retirees Beware Connecticut: Exemptions Based on Income

Connecticut taxes Social Security benefits only for higher-income retirees:

1. Single filers with AGI below $75,000: No tax.
2. Joint filers with AGI below $100,000: No tax.

Above these thresholds, some Social Security benefits may be taxable.

Retirees Beware Minnesota: A State Subtraction Can Help

Minnesota taxes Social Security income but offers deductions to offset the tax burden:

1. If your income falls below certain levels, you can subtract part of your benefits from taxable income.
2. This deduction is phased out for higher earners.

Tip: Check if you qualify for Minnesota’s retirement subtraction credits to reduce your tax bill.

Retirees Beware Montana: Partial Exemptions for Seniors

Montana’s Social Security tax follows federal guidelines, but retirees 65 and older get a break:

1. Up to $5,500 of federally taxable Social Security benefits can be deducted.
2. However, this deduction is reduced for higher-income retirees.

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Retirees Beware New Mexico: Income-Based Exemptions

New Mexico’s taxation on Social Security benefits changed in recent years:

1. Single filers with AGI under $100,000: Exempt.
2. Joint filers under $150,000: Exempt.
3. Above these limits, some Social Security income is taxed.

Tip: If you’re considering retiring in New Mexico, make sure your AGI stays under the exemption threshold.

Retirees Beware Rhode Island: Age & Income-Based Exemption

Rhode Island taxes Social Security benefits but provides exemptions:

1. You must have reached full retirement age (as defined by Social Security).
2. Your income must be below the state’s threshold (varies yearly).

If you qualify, your benefits are fully exempt from state taxation.

Retirees Beware Utah: Tax Credit Available

Utah taxes Social Security benefits, but retirees can claim a tax credit to offset the taxes owed.

1. The credit is phased out for higher-income retirees.
2. This means lower-income retirees may pay little or no tax on benefits.

Retirees Beware Vermont: Income-Based Exemption

Vermont follows federal taxation rules but offers an exemption for lower-income retirees:

1. Single filers with AGI under $50,000: No tax.
2. Joint filers under $65,000: No tax.
3. Above these thresholds, benefits may be partially taxed.

Tip: Keeping your AGI low can help you avoid Vermont’s Social Security tax.

Retirees Beware West Virginia: Phasing Out Social Security Tax

Good news for retirees in West Virginia:

1. In 2025, 65% of Social Security benefits will be tax-free.
2. By 2026, all Social Security benefits will be fully exempt!

West Virginia is transitioning to becoming a Social Security tax-friendly state.

Retirees Beware (FAQs)