In 2025, the majority of U.S. states will not tax Social Security benefits, offering considerable relief to millions of retirees who rely on these payments for their daily living expenses. A total of 41 states, along with Washington, D.C., have enacted policies that either exempt Social Security income from taxation or do not have a state income tax at all. This approach helps safeguard retirees’ limited incomes, especially as cost-of-living pressures persist nationwide.
Currently, federal law allows up to 85 percent of Social Security benefits to be subject to federal income tax, based on a retiree’s combined income. However, whether those same benefits are taxed at the state level depends entirely on individual state tax codes. While the number of states taxing Social Security has decreased over the past several years, nine states will still apply some level of taxation on these benefits in 2025.
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Taxation Still Applies in Nine States
Though the overall trend favors exemption, nine states continue to tax Social Security income, either in whole or in part. These states use different methods to determine how much, if any, of a recipient’s benefits are subject to tax. In some states, only higher-income earners are affected, while others apply broader tax provisions that impact a larger share of the retiree population.
| State | Taxation Method |
|---|---|
| Colorado | Full exemption for individuals aged 65 and older. Those aged 55 to 64 qualify for exemption if their income is below certain thresholds. |
| Connecticut | Benefits are exempt if income is below $75,000 for single filers or $100,000 for joint filers. Partial tax applies above these levels. |
| Minnesota | Applies a subtraction based on income; phased out for higher incomes. Only partial benefits are taxed for most residents. |
| Montana | Applies state income tax to Social Security; small deductions are available for some seniors. |
| New Mexico | Fully exempts benefits for lower-income retirees; benefits become taxable when income exceeds a defined threshold. |
| Rhode Island | Exemption granted if income is below certain limits. Above those levels, a portion of the benefits may be taxed. |
| Utah | Follows federal taxation rules but offers a state-level non-refundable credit to offset the tax for qualifying incomes. |
| Vermont | Offers full exemption for retirees earning less than $50,000 (single) or $65,000 (joint). Benefit taxation increases with higher income. |
| West Virginia | Currently provides a partial exemption. Benefits will be fully exempt from state taxation beginning in 2026. |
The presence of income-based exemptions in several of these states means that not all retirees are affected equally. In many cases, lower-income individuals, especially those who rely primarily on Social Security for their retirement income, do not pay state taxes on their benefits.
States Offering Full Social Security Tax Exemption
In contrast to the above, a significant number of states offer full exemption from state income tax on Social Security benefits. This group includes states that have no income tax at all, as well as those that tax income but exclude Social Security from their tax base.
| States with No State Income Tax | States with Income Tax but Full Exemption |
|---|---|
| Alaska, Florida, Nevada, | Alabama, Arizona, Arkansas, California, Delaware, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Nebraska, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Virginia, Wisconsin |
| South Dakota, Tennessee, Texas, | |
| Washington, Wyoming |
Washington, D.C. also provides a full exemption from Social Security taxation, further expanding the areas where retirees can collect their full benefit without a state tax deduction. These jurisdictions present a more favorable tax environment for retirees, especially those who depend heavily on Social Security for their living expenses.
Recent Changes in State Tax Laws
Several states have moved in recent years to improve the tax treatment of Social Security income. Missouri, Nebraska, and Kansas have each passed legislation that eliminates state taxes on Social Security benefits starting in either 2024 or 2025. West Virginia is on a phased path to complete exemption by 2026, further reducing the list of states that still tax these benefits.
These changes reflect an ongoing shift in state tax policy that favors retirees. Lawmakers in several regions have cited increased inflation and the growing reliance on Social Security by older Americans as primary reasons for these changes. As a result, many states are reassessing how retirement income is taxed.
Financial Impact for Retirees
For retirees living in a state that does not tax Social Security benefits, the financial impact can be meaningful. Consider a retiree who receives $30,000 annually in Social Security income. If their state has a 5 percent income tax rate, that individual would save $1,500 each year by living in a state that does not tax benefits.
On a larger scale, the economic benefits are even more notable. In Missouri, after the elimination of Social Security taxation, retirees collectively saved an estimated $309 million annually. In Nebraska, that figure reached around $17 million per year. These savings enable retirees to allocate more funds to housing, healthcare, and other necessary expenses during retirement.