If you’re planning to retire or are already receiving Social Security benefits, there’s an important update you can’t ignore in 2025. While most states don’t tax Social Security income, a select few still do—and depending on where you live, that could mean a smaller check each month.
As retirement income becomes more vital with inflation and cost-of-living increases, understanding how state-level taxation impacts your benefits is essential.
Here’s everything you need to know about the nine states that still tax Social Security benefits in 2025, how much you could lose, and what you can do about it.
States That Tax Social Security in 2025
In 2025, 9 U.S. states continue to tax Social Security benefits, either partially or in full, based on income thresholds and other conditions. These states are:
- Colorado
- Connecticut
- Minnesota
- Montana
- New Mexico
- Rhode Island
- Utah
- Vermont
- West Virginia
Each of these states applies different rules, income thresholds, and exemptions. If you live in one of them—or are considering moving—you’ll want to understand the specifics.
How Each State Taxes Social Security Benefits
| State | 2025 Tax Rule Summary |
|---|---|
| Colorado | Offers partial exemptions depending on age and income; full exemption if age 65+ and under certain income. |
| Connecticut | Exempts benefits below income thresholds; taxes part of benefits if income exceeds limits. |
| Minnesota | Uses federal taxable amount but offers subtraction for low-to-moderate income earners. |
| Montana | Follows federal taxable benefit rules, taxing a portion based on income. |
| New Mexico | Provides exemption below $100K (single) and $150K (joint); above these limits, benefits are taxed. |
| Rhode Island | Exempts benefits for full retirement age earners under income limits. |
| Utah | Offers a nonrefundable credit for low-income retirees. |
| Vermont | Full exemption under $50K (single) or $65K (joint); phased-out exemption up to $60K/$75K. |
| West Virginia | Phasing out tax: 65% exemption in 2025, full exemption in 2026. |
Why This Matters for Retirees
If you’re relying on Social Security as a primary income source, losing even a small percentage to state tax can affect your monthly budget. In high-tax states, this could mean hundreds of dollars annually.
Knowing how much of your benefits are subject to taxation based on your income and filing status is key to protecting your retirement finances.
Tips to Reduce the Tax Impact
Here are a few strategies to help minimize how much tax you pay on Social Security income:
- Keep your income under state-specific thresholds to qualify for full or partial exemptions.
- Use Roth IRA withdrawals or tax-free investments that don’t count as taxable income.
- Take advantage of state credits and deductions, especially if you’re a low-to-moderate-income retiree.
- Consider relocating to a state with no Social Security tax if feasible and practical.
In 2025, nine states continue to tax Social Security benefits, potentially shrinking your monthly payments if you live in one of them. With each state setting its own rules and thresholds, it’s important to plan wisely, monitor your income, and explore financial strategies to protect your retirement funds.
Whether you’re approaching retirement or already enjoying it, understanding how your state treats Social Security could help you keep more of what you’ve earned. Be proactive, stay informed, and make the best financial decisions for your golden years.
FAQs
Are Social Security benefits taxed at the federal level too?
Yes, depending on your income, up to 85% of your Social Security benefits can be taxed federally.
Can I avoid state taxes by moving to another state?
Yes, relocating to a state that doesn’t tax Social Security can eliminate state-level taxes. But consider all living costs and quality of life factors before making that decision.
What happens if my income fluctuates above and below the threshold?
Some states use yearly income to determine tax eligibility. One year you might be exempt, and the next you might not be—so regular income planning is important.