Nine States Still Tax Social Security Benefits Based on Age and Income in 2025

As of December 2025, nine states still tax Social Security benefits based on age and income, making them exceptions in an era when most U.S. states have chosen to eliminate this tax burden for retirees. While the federal government continues to tax benefits above certain income thresholds, these states impose additional taxes depending on a retiree’s income level and, in some cases, age.

For millions of Americans living on fixed retirement incomes, this distinction has become increasingly important. With inflation, healthcare costs, and housing expenses still rising, retirees carefully weigh which states protect more of their Social Security checks.

The 2025 Overview: Where Social Security Benefits Are Still Taxed

Forty-one states and the District of Columbia now exempt Social Security income from state taxation. However, nine states continue to tax at least a portion of those benefits. Each applies its own rules, exemptions, and income limits, meaning a retiree’s tax liability can differ drastically depending on where they live.

The nine states that currently tax Social Security benefits in 2025 are:

• Colorado
• Connecticut
• Kansas
• Minnesota
• Montana
• New Mexico
• Rhode Island
• Utah
• Vermont

In each of these states, the tax burden is determined by a combination of adjusted gross income (AGI) and age-based exemptions.

Each state’s approach is unique, but all share one feature: the more income a retiree earns, the more likely they are to face state-level taxation on benefits.

Federal Rules Still Apply

Even before state taxes come into play, retirees face potential taxation from the federal government. Federal Social Security tax rates have not changed since they were introduced in 1983. In 2025, up to 85% of Social Security benefits can be taxable depending on income.

• Single filers: Income between $25,000 and $34,000 means up to 50% of benefits may be taxed; above $34,000, up to 85%.
• Married filing jointly: Income between $32,000 and $44,000 is subject to up to 50% taxation; above $44,000, up to 85%.

Because many state tax codes use federal adjusted gross income as a starting point, retirees who owe federal tax are often the same ones who face state-level taxation.

Why Only Nine States Still Tax Benefits

Over the past decade, states have steadily moved toward eliminating taxes on Social Security. The primary motivation has been to attract and retain retirees while recognizing the financial challenges of aging populations.

Since 2018, several states—including Nebraska, Missouri, and West Virginia—have phased out their Social Security taxes completely. The result is that only nine states remain where residents may still owe taxes on their benefits.

The reasons these states continue taxing benefits vary:

• Revenue Dependence: Some states, such as Minnesota and Vermont, rely heavily on income tax revenue and argue that taxing higher earners ensures fairness.
• Gradual Reforms: States like New Mexico and Rhode Island have expanded exemptions in recent years but stopped short of full repeal due to budget constraints.
• Policy Tradition: A few states link state tax rules to federal calculations, maintaining consistency rather than rewriting their codes entirely.

While these states defend their tax structures as progressive—targeting higher-income retirees—critics argue they penalize those who saved diligently during their careers.

The Role of Age-Based Deductions

Age plays a direct role in several of the nine states’ policies. Colorado, Rhode Island, and New Mexico all offer higher exemptions or deductions to residents aged 65 or older. These adjustments acknowledge that older retirees often have fixed incomes and limited earning potential.

For example:

• Colorado exempts up to $24,000 of retirement income, including Social Security, for taxpayers over 65.
• Rhode Island exempts benefits entirely for seniors whose adjusted gross income falls below its income cap.
• New Mexico provides expanded deductions for older residents and continues to increase the thresholds annually.

These policies reflect an effort to balance state revenue needs with compassion for aging populations.

State-by-State Breakdown

Colorado

Colorado’s taxation structure allows partial exclusions based on age. Retirees aged 55–64 can deduct up to $20,000 in retirement income, while those 65 or older receive up to $24,000. Combined with recent inflation adjustments, this setup protects many seniors from paying any tax at all on Social Security benefits.

Connecticut

Connecticut exempts Social Security for single filers earning less than $75,000 or joint filers below $100,000. Beyond these thresholds, benefits may be partially taxed, though residents also receive deductions for pensions and other retirement income.

Kansas

Kansas taxes Social Security benefits for retirees whose federal adjusted gross income exceeds $75,000. The rule applies uniformly across filing statuses, which some critics argue unfairly affects dual-income households.

Minnesota

Minnesota’s system remains one of the most complex. The state offers a partial subtraction known as the “Social Security Subtraction,” which allows qualifying taxpayers to exclude part of their benefits based on income level. However, high earners may pay tax on as much as 85% of their benefits, mirroring federal law.

Montana

Montana taxes benefits on a sliding scale that begins at relatively low income levels—$25,000 for individuals and $32,000 for joint filers. The higher the income, the larger the taxable portion, up to 85%. Montana lawmakers have debated raising thresholds to reflect modern cost-of-living increases, but no changes have been enacted yet.

New Mexico

After reforms enacted in 2024, New Mexico now exempts most retirees with incomes below $100,000. Seniors above that amount pay tax on a portion of their benefits, though age-based deductions reduce the burden for those over 65.

Rhode Island

Rhode Island provides an exemption for retirees age 65 or older whose income falls below $118,750 for single filers or $148,050 for joint filers. Retirees above those thresholds pay tax on a portion of their benefits.

Utah

Utah replaced its previous taxation system with a refundable retirement credit. In 2025, retirees with income under $45,000 (single) or $75,000 (joint) receive a full credit that effectively erases the tax. As income rises, the credit phases out gradually.

Vermont

Vermont’s structure closely mirrors Minnesota’s. The state provides a full exemption for single filers earning under $50,000 and joint filers under $65,000. Partial exemptions apply for higher incomes, phasing out completely at about $60,000 and $75,000 respectively.

The Impact on Retirees

For retirees in these nine states, the impact of Social Security taxation depends largely on total household income. Those relying solely on benefits rarely owe state tax, but retirees with savings, pensions, or investment income may face notable liabilities.

The average retiree benefit in 2025 is roughly $1,910 per month, or about $22,920 annually. When combined with other income, many retirees in these states exceed local thresholds and end up paying partial state taxes.

This has led some retirees to relocate to tax-free states such as Florida, Tennessee, or Texas, where Social Security income and other retirement earnings are untaxed. Migration data from the past five years shows a steady movement toward these more tax-friendly areas.

Legislative Momentum Toward Repeal

Several of the nine states still taxing Social Security benefits are actively considering reforms:

• Minnesota: Lawmakers have signaled a phased repeal plan by 2026.
• Rhode Island: Budget committees are reviewing proposals to raise exemption thresholds to match inflation.
• New Mexico: The governor has expressed support for eliminating the remaining taxes on low- and middle-income retirees.
• Colorado and Utah: Both states are revisiting their deduction formulas to offer higher credits for older residents.

As political pressure grows from aging populations, complete elimination in more states is likely within the next few years.

Comparing to Tax-Free States

By contrast, 41 states—including large retiree destinations like Florida, Arizona, and South Carolina—do not tax Social Security income at all. Some, such as Texas and Nevada, have no state income tax whatsoever.

This difference in tax treatment can amount to thousands of dollars in annual savings for retirees, influencing migration patterns and housing markets in senior-heavy regions.

What Retirees Should Consider

If you live in one of the nine states that still tax Social Security, consider these strategies to reduce your burden:

• Monitor income carefully to stay below exemption thresholds.
• Utilize deductions for retirement contributions, healthcare, and property taxes.
• Explore relocation or residency options in states with no taxation of benefits.
• Work with a qualified tax advisor to calculate your effective rate annually.

Awareness of how your state treats Social Security income is critical for long-term financial planning.

With nine states still taxing Social Security benefits based on age and income, retirees in 2025 face an uneven landscape across the U.S. While most states have eliminated these taxes entirely, the remaining few continue to adjust thresholds and credits. Staying informed about state tax laws ensures retirees can protect more of their hard-earned benefits and make the best decisions for their financial future.

What do you think—should all states eliminate taxes on Social Security income? Share your opinion below.