Social Security is a vital source of income for millions of retirees across the United States. However, not everyone is aware that these benefits may be subject to taxes – both federally and at the state level. While federal taxes on Social Security apply to retirees with income exceeding a specific threshold, some states impose their own income taxes on these benefits, adding another financial layer to consider during retirement planning.
If you’re nearing retirement or already receiving Social Security, knowing which states tax these benefits can help you better prepare and manage your finances. Let’s dive into the list of states where Social Security benefits are taxed in 2025 and understand how much you might owe.
States That Tax Social Security Benefits
Out of all 50 states, only nine currently tax Social Security benefits in 2025. Each state has its unique rules for calculating these taxes, often based on factors such as income levels and filing status. Here’s the breakdown:
1. Colorado
Colorado taxes Social Security benefits as part of its state income tax. However, retirees can claim a pension or annuity subtraction, which reduces the taxable portion for those aged 55 and older.
2. Connecticut
Connecticut imposes income tax on Social Security but offers exemptions for lower-income earners. Individuals with an adjusted gross income (AGI) below a certain threshold ($75,000 for single filers and $100,000 for joint filers) won’t owe taxes on their benefits.
3. Kansas
Kansas taxes Social Security benefits for individuals earning more than $75,000 in AGI, regardless of filing status. Retirees below this income threshold are fully exempt.
4. Minnesota
Minnesota calculates Social Security taxes based on federal taxable amounts, but low-income retirees can benefit from exemptions or credits. Check your income bracket to determine what applies to you.
5. Missouri
Missouri has exemptions for retirees depending on their AGI. Single filers earning below $85,000 and joint filers earning less than $100,000 are generally exempt from taxes on Social Security income.
6. Montana
Montana includes Social Security benefits in state income taxes, similar to federal taxation rules. Retirees with lower incomes may qualify for partial or full exemptions.
7. Nebraska
Nebraska taxes Social Security income for individuals earning over $45,000 (or $60,000 for joint filers). There are gradual reductions for those earning below these thresholds, making it crucial to understand your tax bracket.
8. New Mexico
New Mexico has been reducing its taxation on Social Security benefits in recent years. In 2025, retirees with lower incomes will likely face no tax burden, while higher earners might still owe taxes.
9. Utah
Utah taxes Social Security benefits but provides a retirement tax credit to help offset the cost for low- to middle-income retirees.
How Much Could You Owe?
The amount of tax you owe on Social Security benefits depends on three main factors:
- State Rules: Each state has its formula for calculating taxes.
- Income Level: Retirees with higher AGI typically face higher taxes.
- Exemptions or Credits: Many states offer tax credits or exemptions for lower-income retirees.
For instance, if you live in Connecticut and earn less than $75,000 annually, you won’t owe state taxes on your benefits. On the other hand, if you’re a high earner in Minnesota or Nebraska, you might owe taxes on up to 85% of your Social Security income.
Tips to Minimize Your Tax Burden
If you’re concerned about state taxes on Social Security, consider these strategies to reduce your financial burden:
- Relocate to Tax-Free States
Several states, like Florida, Texas, and Nevada, do not tax Social Security benefits. Moving to these states can eliminate your state tax obligations entirely. - Lower Your Taxable Income
Managing your AGI can help you qualify for state exemptions or reduced tax rates. For example, withdrawing funds strategically from tax-advantaged accounts like Roth IRAs can help lower your taxable income. - Understand State-Specific Credits
Many states offer credits or deductions to reduce the taxable portion of Social Security benefits. Check the rules in your state to see if you qualify. - Consult a Financial Advisor
Tax laws vary widely, and staying on top of them can be challenging. A financial advisor can help you develop a retirement strategy that minimizes your tax liability.
Why Knowing These Taxes Matters
Planning for retirement involves more than just saving money—it’s about understanding how much of your income will be taxed. Knowing which states tax Social Security benefits allows you to make informed decisions about where to live, how to manage your income, and how to maximize your benefits.
For instance, a retiree planning to move to Kansas may reconsider if their income exceeds the $75,000 threshold, as they could face unexpected tax obligations. On the other hand, retirees with modest incomes might find states like Colorado or Missouri more financially favorable due to available exemptions.
Final Thoughts
Taxes on Social Security benefits can catch retirees off guard, especially if they move to one of the nine states that impose these taxes. By staying informed about state tax rules and planning accordingly, you can reduce your financial burden and enjoy a more secure retirement.
Remember, it’s always a good idea to consult with a tax professional or financial planner to ensure you’re making the best decisions for your situation. Whether it’s finding ways to lower your AGI or relocating to a tax-friendly state, proactive planning can make a significant difference.
Disclaimer – Our team has carefully fact-checked this article to make sure it’s accurate and free from any misinformation. We’re dedicated to keeping our content honest and reliable for our readers.
Himanshu Sharma writes for The Octant, focusing on recruitment, government schemes, and current affairs. He is dedicated to making complex information accessible to readers.
Himanshu enjoys playing chess, hiking, and trying new recipes, always seeking ways to combine his love for writing with his passion for exploration.