These States Will Dip into Your Social Security in 2025: If you’re planning to retire soon or are already receiving Social Security benefits, it’s crucial to understand how state taxes may impact your income. While the federal government taxes Social Security under specific conditions, some U.S. states also tax these benefits, and new changes are coming in 2025 that may affect your take-home income more than you think. With the rising cost of living and increased longevity, retirees are increasingly relying on every dollar of income. That means understanding where your money is going—and how much of it is going to taxes—is more important than ever.
Whether you’re a retiree living on a fixed income or someone planning for a financially secure future, knowing which states will dip into your Social Security in 2025 is essential. This comprehensive guide will walk you through everything you need to know in plain, clear language—while also providing the depth and accuracy you’d expect from a seasoned financial professional. We’ll explain why certain states still tax these benefits, what it means for your retirement strategy, and how you can protect more of your hard-earned money.
These States Will Dip into Your Social Security in 2025
| Topic | Details |
|---|---|
| Number of States Taxing Social Security in 2025 | 9 States |
| States Affected | CO, CT, MN, MT, NM, RI, UT, VT, WV |
| States Phasing Out Tax | West Virginia (full exemption by 2026) |
| Flat Tax Example | Utah taxes all income at 4.55%, with credits available |
| Resource for Social Security Info | SSA.gov |
As we move into 2025, it becomes increasingly important to understand how Social Security benefits are taxed by the states. With nine states continuing to tax benefits in varying ways, your place of residence can significantly influence your net retirement income.
Being proactive can pay dividends. Whether you’re relocating, planning withdrawals, or just budgeting for the future, knowing your state’s tax rules allows you to make smarter, more strategic decisions. Consider speaking with a professional advisor, especially if you anticipate changes in income or location.
Remember, retirement should be about enjoying life—not stressing over taxes. With the right knowledge and tools, you can ensure a financially secure and stress-free retirement. Education is power, and when it comes to your retirement, it can also mean peace of mind.
Why Some States Tax Social Security
Unlike the federal government, which only taxes Social Security if your combined income exceeds certain thresholds, states can set their own rules when it comes to taxing retirement benefits. That means your location could significantly impact how much of your Social Security income you actually get to keep. These state-level decisions can be driven by a variety of economic factors, including budget shortfalls, demographic trends, or shifting political priorities.
Most states fall into one of three categories:
- Fully exempt Social Security from income tax
- Offer partial exemptions based on factors like income level, age, or filing status
- Tax some or all benefits, often aligning with federal guidelines
Understanding where your state stands is critical for long-term planning. For example, a retiree earning $40,000 annually might keep more of their income in one state compared to another due to different tax treatments. And that extra income can be crucial—it might be the difference between traveling in retirement or staying home, affording top-tier healthcare or not.
Moreover, states update tax policies regularly, especially when budgets change. Some may introduce tax breaks for seniors to attract retirees, while others may revise exemptions to increase revenue. This means staying informed year after year is an important part of retirement planning. In the world of taxes, nothing is set in stone.
The 9 States That Will Tax Your Social Security in 2025
1. Colorado (CO)
In Colorado, Social Security benefits are partially taxed, with deductions available depending on your age and income. If you’re 65 or older, you’re in luck: all federally taxable Social Security income is deductible from your state return. But for retirees aged 55 to 64, deductions are capped—$75,000 for single filers and $95,000 for joint filers. If you earn more, you might pay state taxes on a portion of your benefits. That said, Colorado has relatively low property tax rates, which can balance the burden depending on your situation.
2. Connecticut (CT)
Connecticut has relatively generous exemptions if you fall under certain income limits. For single filers with Adjusted Gross Income (AGI) under $75,000, or married couples under $100,000, Social Security benefits are entirely tax-free. Once you pass that threshold, though, the state may tax up to 25% of your benefits, depending on your exact income bracket. Connecticut also has a higher cost of living, so retirees must weigh all financial factors when planning.
3. Minnesota (MN)
Minnesota closely mirrors federal tax policy. If your Social Security benefits are taxed federally, they will likely be taxed at the state level as well. However, the state does offer income-based subtractions. For example, joint filers with AGI under $105,380 and individuals under $82,190 may qualify for partial or full exemptions. It’s important to monitor both state and federal rules each year. With Minnesota’s four-season climate and cultural attractions, many retirees still choose to stay and adapt their financial strategies accordingly.
4. Montana (MT)
Montana includes Social Security in its list of taxable income sources, but there are allowances for seniors. If you are 65 or older, you can subtract up to $5,500 from your federally taxable income. This means you may not owe taxes on your Social Security unless your total income exceeds that amount. Filing status, additional retirement income, and other deductions can also influence your tax liability. Montana’s beautiful scenery and slower pace of life are appealing, but understanding tax liabilities is key before settling down.
5. New Mexico (NM)
New Mexico has made recent strides to become more retiree-friendly. As of 2025, Social Security income is completely exempt for single filers earning under $100,000 and married couples under $150,000. For those above the threshold, a portion of benefits may still be taxed, though future legislation could expand exemptions further. The state’s overall tax burden is mixed, so retirees need to assess the full picture—including sales and property taxes.
6. Rhode Island (RI)
Rhode Island uses both age and income to determine eligibility for tax exemptions. Retirees must have reached full retirement age as defined by the Social Security Administration and have AGI under $104,200 (single) or $130,250 (joint) to receive a full exemption. Otherwise, your benefits could be partially taxed by the state. With its coastal charm and proximity to major cities, Rhode Island is attractive, but it’s wise to factor in healthcare and housing costs.
7. Utah (UT)
Utah uses a flat tax rate of 4.55%, and this applies to all income sources—including Social Security. However, to soften the blow for retirees, the state offers a non-refundable credit that can offset some or all of the tax owed on Social Security benefits. There’s also ongoing legislative interest in eliminating this tax entirely, so keep an eye on updates from local government sources. Utah is gaining popularity among retirees for its natural beauty and active lifestyle options.
8. Vermont (VT)
Vermont offers a graduated exemption based on your income. If you’re a single filer earning less than $50,000 or a couple under $65,000, your Social Security income is fully exempt. Partial exemptions apply up to $59,999 (single) or $74,999 (joint). Once you cross these thresholds, a portion of your benefits will be subject to state tax. Vermont’s peaceful rural towns and vibrant seasonal changes offer appeal, but the state’s overall tax burden is among the highest.
9. West Virginia (WV)
West Virginia is phasing out its tax on Social Security income in stages. In 2025, 65% of your benefits will be exempt, and by 2026, the tax will be fully eliminated. This is welcome news for retirees considering relocating within the Appalachian region. West Virginia’s low housing costs and slower lifestyle are appealing for those seeking a quiet retirement.
What This Means for Your Retirement
If you live in one of these nine states, your Social Security benefits could be taxed unless your income falls under the exemption limits. Understanding how your benefits are taxed can help you anticipate how much money you’ll actually have available in retirement. This knowledge is essential when setting a monthly budget or planning long-term savings withdrawals.
Example Scenario
Meet Susan and Mike, a retired couple living in Vermont with a joint AGI of $68,000. Vermont offers a partial exemption up to $74,999 for couples, so only a fraction of their Social Security will be taxed. If they moved to a state like Texas or Florida, which does not tax income at all, they could potentially save several hundred dollars annually. That savings could be redirected toward travel, medical expenses, or simply preserved in a rainy-day fund.
On the flip side, someone living in Utah with a similar income might pay taxes unless they’re eligible for credits. Knowing this helps retirees make more informed decisions about where to live, how much to save, and when to claim benefits. Every dollar saved in taxes is a dollar that can be used to enrich your lifestyle in retirement.
Practical Advice for Retirees
1. Know Your State’s Rules
Tax laws change frequently. Always consult your state’s department of revenue or a certified tax professional to get the most up-to-date information. Subscribing to a state tax bulletin or visiting official government websites annually can keep you in the loop.
2. Use Tax Software or a Professional
Even if you’re financially savvy, retirement taxes can be complex. Consider working with a retirement-focused financial planner or using sophisticated tax software to forecast your liabilities. Many online calculators are available for free and can model different scenarios.
3. Plan Before You Move
Relocating during retirement? Think beyond just weather and amenities. Look at overall tax burden, including property taxes, sales tax, estate tax, and state tax treatment of pensions and retirement savings accounts. You might find that a seemingly low-tax state still costs more overall.
4. Use IRS and SSA Resources
- Social Security Administration
- IRS Tax Guide for Seniors (Publication 554)
- State Tax Departments Directory
- AARP Retirement Resource Center
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FAQs About These States Will Dip into Your Social Security in 2025
Do all states tax Social Security benefits?
No. Only nine states currently tax Social Security income. The majority of U.S. states offer full exemptions, but each has unique rules for other forms of retirement income.
What if I live in multiple states during the year?
You may be considered a part-year resident in multiple states. Depending on your residency and income allocation, you might owe taxes in more than one state. Keep thorough records to avoid surprises at tax time.
How do I know if my Social Security is taxable at the federal level?
Federal taxation depends on your combined income, which includes AGI, tax-exempt interest, and half your Social Security benefits. If this exceeds $25,000 (single) or $32,000 (joint), up to 85% of your benefits may be taxable.
Are there efforts to eliminate Social Security taxes?
Yes. Multiple states have proposed or implemented changes to ease or eliminate taxes on retirement income. For instance, West Virginia is phasing out its tax entirely by 2026, and Utah is considering doing the same. Stay engaged with your state legislators for updates.
How can I reduce taxes on my Social Security?
Diversifying your income sources and strategically timing withdrawals from retirement accounts like 401(k)s and IRAs can help lower your taxable income. Consider speaking with a retirement tax strategist or using Roth conversions strategically.
