Social Security has been a lifeline for millions of American retirees for decades, allowing many to remain financially stable in their later years. Most people pay into the Social Security system through payroll taxes throughout their careers, expecting to reap benefits on the back end.
However, one thing you shouldn’t forget about Social Security is that it’s income, and like other forms of income, there’s a chance you’ll have to pay taxes on the benefits you receive. The good news is that most states do not tax Social Security benefits. The bad news is that there are still some states that do.
Currently, the following are nine states that do not tax Social Security benefits:
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colorado
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connecticut
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minnesota
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Montana
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New Mexico
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rhode island
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Utah
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Vermont
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west virginia
If you currently live in one of these states, know that all hope is not lost. States have been phasing out Social Security taxes, and it’s possible your state is joining the trend. Take West Virginia, for example, which will eliminate the tax entirely starting in the 2026 tax year.
An important thing to note is that even if your state doesn’t tax Social Security benefits, that doesn’t mean you can completely avoid taxes. Federal tax rules apply to everyone regardless of their state’s laws.
The IRS determines how much your benefits may be taxable based on your combined income, which is the sum of your adjusted gross income (AGI), one-half of your annual Social Security benefit, and any non-taxable interest you receive. For example, if your AGI is $10,000, you have $20,000 in benefits, and receive $500 in Treasury payments, your combined income will be $20,500 ($10,000 + $10,000 + $500).
Based on your combined income, here is the amount of income you are eligible to pay tax on:
|
Filing status |
comprehensive income |
taxable benefit percentage |
|---|---|---|
|
single |
US$25,000 to US$34,000 |
up to 50% |
|
single |
Over $34,000 |
Up to 85% |
|
Married, filing jointly |
US$32,000 to US$44,000 |
up to 50% |
|
Married, filing jointly |
Over $44,000 |
Up to 85% |
Source: IRS.
The amount of your tax-eligible benefit is added to your other sources of income and then taxed at your regular income tax rate. For example, if $15,000 of your benefit is eligible for tax, that $15,000 will be added to your other income and then taxed regularly.