Some Retirees Pay State Income Tax on Social Security in These 8 States

Just about all of us have Social Security benefits to look forward to each month — or we may already be receiving them. Indeed, as of 2024, nearly 73 million people were collecting Social Security benefits. The checks may not be as big as we’d prefer, but they’re still likely to make up a significant chunk of our retirement income.

So whether we get taxed on that income is kind of important to know.

Image source: Getty Images.

Which states tax Social Security?

If you’re worried about having your Social Security checks taxed by your state, you’ll be happy to know that fully 42 states, plus the District of Columbia, do not tax Social Security benefits. (That number has been growing in recent years — up from 37 in 2017, for example.)

But eight states do still tax Social Security benefits. They are:

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

That may seem like a bummer if you live in one of those states, but hold on — because these states mostly tax Social Security benefits with a relatively light hand. For example:

• Vermont taxes no benefits for individuals with an adjusted gross income (AGI) of less than $55,000, and offers a partial exemption for incomes of $55,001 to $64,999. For married joint filers, those figures are $70,000, and $70,001 to $79,999.
• Colorado doesn’t tax benefits for single filers aged 55 to 64 with an AGI less than or equal to $75,000, or for married people filing jointly with AGIs less than or equal to $95,000. People 65 and older pay no tax on Social Security.
• New Mexico doesn’t tax Social Security benefits for middle- and low-income earners — about 86% of New Mexico seniors. Single filers earning more than $100,000 annually and joint filers earning more than $150,000 do face some taxation.

Don’t forget Uncle Sam

Unfortunately, while your state probably doesn’t tax Social Security, the federal government does. The rate depends on your “combined income,” which is your AGI plus non-taxable interest, plus half of your Social Security benefits. Here are the details:

Data source: Social Security Administration.

If you’re gasping at the 85% figure, understand that it doesn’t mean those folks have to fork over 85% of their benefits. It means that up to 85% of their income could be taxed, leaving 15% untaxed.

When you’re assessing how taxes will affect you, you need to consider all the taxes you’ll face. One state may not tax Social Security, but it might tax your property heavily or have a steep sales tax. Another state may levy significant income tax, while taxing other things lightly. Learn more about taxation in retirement as you plan for your future.