Retirees Beware: These States Will Tax Your Social Security Benefits in 2025!

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Social Security benefits have been a financial lifeline for millions of Americans since they were introduced in 1935. For some retirees, these benefits are the main source of income, while for others, they provide supplementary financial support. However, depending on where you live, a portion of these benefits may be taxed by your state.

In 2025, retirees in certain states may find themselves paying state income taxes on their Social Security benefits. While most states offer relief, a handful still impose taxes on these benefits. Let’s break it down.

States That Tax Social Security Benefits

The good news is that 41 states and Washington, D.C., do not tax Social Security benefits. However, retirees in nine states could face state taxes on their benefits in 2025. These states include:

• Colorado
• Connecticut
• Minnesota
• Montana
• New Mexico
• Rhode Island
• Utah
• Vermont
• West Virginia

This list has gotten shorter in recent years. In 2020, 13 states taxed Social Security benefits but states like Nebraska, Missouri, and Kansas have since eliminated this tax.

How Each State Handles Social Security Taxes

Every state has different rules for taxing Social Security benefits. Here’s a snapshot of how some states approach it:

• Colorado: Starting in 2025, retirees making under $75,000 (single filers) or $95,000 (joint filers) will be exempt from state taxes on Social Security benefits.
• Minnesota: Couples earning over $105,380, single filers earning over $82,190, or separate filers earning over $52,960 may pay taxes on their benefits.
• Utah: Social Security benefits are taxed at a flat rate of 4.55%.

State rules can change, so it’s important to stay updated on tax policies where you live.

Federal Taxes on Social Security

Even if your state doesn’t tax Social Security benefits, federal taxes might still apply. The IRS determines federal Social Security taxes based on your combined income, which is calculated as follows:

1. Your adjusted gross income (AGI).
2. Nontaxable interest (e.g., municipal bonds).
3. Half of your Social Security benefits.

For instance, if your AGI is $18,000, nontaxable interest is $1,000, and your Social Security benefits total $24,000, your combined income would be $31,000.

Based on IRS rules:

• Single filers with a combined income of $25,000–$34,000 may have 50% of their benefits taxed.
• If it’s over $34,000, up to 85% may be taxed.

For married couples filing jointly, the thresholds are $32,000–$44,000 (50% taxable) and above $44,000 (85% taxable).

What Retirees Should Do

If you live in a state that taxes Social Security, or you expect federal taxes to apply, consider these steps:

1. Understand Your State’s Rules: Research how your state handles Social Security taxes.
2. Plan Your Retirement Income: Keep track of your AGI and combined income to anticipate your tax obligations.
3. Consult a Financial Advisor: Professional guidance can help you maximize your retirement benefits.

A Financial Boost for Retirees

For retirees seeking additional income, understanding Social Security rules can make a big difference. With the right strategies, you might uncover benefits that can significantly improve your financial situation.

Stay informed about changes in state and federal tax laws, and you’ll be better prepared to enjoy a financially secure retirement.

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