Pay attentive, because 2025 will throw you off guard. Social Security is more than simply an income for many millions of seniors in the United States;
it is a promise that they will be able to live with dignity and peace of mind after years of hard labor; but, depending on where you reside, state taxes can limit this support.
Only nine states will continue to tax Social Security benefits by 2025, putting a direct strain on the budgets of their inhabitants.
We will explain what to expect from this change and how it may affect you.
Which states tax Social Security benefits?
Although Missouri and Kansas have already opted to stop taxing benefits (joining the 41 US states that will not do so), there are still nine states that will continue to do so.
- Colorado: those with an adjusted gross income of less than $75,000 (single) or $95,000 (couple) will be able to fully deduct the benefits taxed at the federal level, thus providing a small relief for users with moderate salaries. However, if you exceed these amounts you will have to pay your taxes as usual.
- Connecticut: In this case, retirees with less than $75,000 (single) or less than $100,000 (couple) will be exempt from taxes. This is intended to help those people who have less economic capacity.
- Montana: You will have stricter restrictions that will only apply to those with an income below $25,000 (if single) and $32,000 (if coupled) which leaves many retirees with additional pensions in the taxable category.
- Road Island: Incomes under $88,950 for singles and $111,200 for couples will be exempt. This will be a relief for most retired residents.
- Utah: Those who earn less than $30,000 (individual) or $50,000 as a couple will be exempt.
- Vermont: Exemption limits are $50,000 for singles and $65,000 for couples, affecting a sizable portion of retirees.
- Minnesota: If you earn less than $82,190 (single) or $105,380 (couple) forget about taxing Social Security benefits.
- West Virginia: While still in the process of phasing out these taxes, benefits will be taxed at only 35%, with full exemption projected for 2026.
- New Mexico: Exempts singles with incomes under $100,000 and couples earning up to $150,000.
Relevant information:
- Why do some states tax Social Security benefits? These taxes seek to generate revenue to balance state budgets.
- How can you minimize the impact of these taxes? Options include moving to states without Social Security taxes or planning income within exemption limits.
- Which states are most favourable to retirees? States like Florida and Texas, which do not tax Social Security
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Table about this changes
State Single Income Exemption Married Income Exemption Special Notes Colorado $75,000 $95,000 Full deduction for federally taxed benefits below the income limits. Connecticut $75,000 $100,000 Sliding scale exemptions to relieve low-income retirees. Minnesota $82,190 $105,380 No taxes on Social Security benefits below these income thresholds. Montana $25,000 $32,000 Strict limits leaving many retirees subject to taxation. Rhode Island $88,950 $111,200 Generous exemptions for most retirees in the state. Utah $30,000 $50,000 Low thresholds mean many retirees remain taxed. Vermont $50,000 $65,000 Significant portion of retirees impacted by low exemption thresholds. West Virginia Gradual reduction Gradual reduction Taxes reduced by 65% in 2025; full exemption expected by 2026. New Mexico $100,000 $150,000 Generous income limits provide relief for most retirees. How can I calculate the impact of taxes on net income?
Don’t worry; it’s much easier than it appears! First, add up your total annual income (including pensions and investments).
Then, see if your state offers exemptions and what the cap is. If you go over that limit, apply your state’s tax rate to the portion of your income that exceeds the threshold. This will provide a clear estimate of the financial impact of taxes.