Retirees Should Avoid These States That Tax Social Security Income

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As you enter retirement, the hope for many retirees is that they will see their Social Security checks remain safe from state taxes. The good news is that for many people who live in the United States, this is true. Entering 2026, 42 states plus Washington, D.C., won't take any cut of your Social Security income whatsoever. However, this means that eight states do plan to take their cut, and if you live in one of them, you must factor this into any conversation about covering your monthly expenses.

The other bit of good news is that there is a trend moving in the right direction to cut out state taxes for Social Security income. West Virginia, for example, just completed its phaseout, while other states like Kansas, Missouri, and Nebraska have all done the same in recent years. This still leaves eight states that will apply at least some level of taxation. The caveat here is that most of these states are focused on higher-income retirees, which they target through various income thresholds.

Ultimately, what matters most isn't whether or not your state is on the list, there is nothing you can do if it is right now, it's whether or not you will actually owe some taxes. Understanding where you fall will help you plan around withdrawals, manage your overall tax liability, and avoid any surprises come April.

Here is the best news: four states have already completed their planned phaseouts as of 2026, and some did in recent years. Better yet, some of the states listed here are also planning to reduce some of their taxes or have active proposals in place to repeal them altogether. Whether this will happen is TBD, but what is clear is that more states are continuing to recognize that taxing Social Security creates an unnecessary financial burden on retirees.

While state taxes are limited in scope in just eight states, the conversation around taxes still exists on the federal level. The IRS continues to use a "combined income" formula to determine overall taxability, which includes your overall adjusted gross income or AGI, plus any nontaxable interest, plus half of your Social Security benefits.

The important number to know is that up to 85% of benefits can be taxed if combined income exceeds $34,000 for single filers and $44,000 for joint filers. A new $6,000 senior deduction for anyone 65 and older will help reduce this burden through 2028.

At the end of the day, if you live in one of these eight states, you have to manage your AGI to help avoid as much of a tax burden as possible. Understanding tactics like delaying Social Security until 70 will give you more time to draw down traditional IRA balances at lower tax rates, or the strategic use of Roth withdrawals during retirement can help keep your AGI lower and potentially stay under exemption thresholds.

Colorado residents are fortunate to have one of the more retirement-friendly policies among the eight taxing states. If you are 65 or older, you can deduct all federally taxed Social Security benefits. For those between the ages of 55 and 64, benefits are taxed if you have an AGI over $75,000 for individuals and $95,000 for any married couples filing jointly. Taxpayers exceeding this number can deduct $20,000 from their tax bill.

You will still find taxes on Social Security benefits in Connecticut, but many residents won't have to pay them when retired. If your AGI is under $75,000, no matter if you are single or married filing separately, you're completely exempt. For those married filing jointly, the exemption bumps up to $100,000, and if your income surpasses this number, no more than 25% of your benefits can be taxed.

Surprisingly, Minnesota is one of the most tax-heavy states in the country, and it taxes any Social Security income the federal government considers taxable. If your AGI is over $84,490, you're going to get taxed, and the same goes for those married filing jointly and earning over $108,320. If you're married and filing separately, your taxation AGI is right around $54,160. There are subtractions of around 10% for every $4,000 over the threshold you exceed, so that is a positive.

Montana's overall income tax policy is pretty straightforward, and it basically comes down to a rate of 5.65% on any income over $95,000 for married filing jointly or $47,500 if you are a single filer. If you are 65 and over, you can also receive a $5,500 substraction from federal taxable income.

While New Mexico does have a policy of taxing Social Security, most retirees can take advantage of the state's exemption policies. Single filers earning up to $100,000 won't have any taxation on their benefits, and the same goes for joint filers earning up to $150,000 annually ($75,000 if filing as married by separate).

Retirees in Rhode Island who reach full retirement age and meet income requirements aren't going to have to navigate any state tax on Social Security. Joint filers with an AGI of $133,750 or more and single filers earning $107,000 will be the only ones subject to state income taxes on Social Security benefits.

If you live in Utah, you are going to be subjected to the state's 4.5% flat income tax rate, but this isn't the whole story. Many retirees in the state will qualify for a nonrefundable Social Security benefits credit that can reduce or eliminate the burden. Based on Modified Adjusted Gross Income, individuals receive a full credit up to $54,000, while married filing jointly receive a full credit up to $90,000.

Vermont offers its residents a full exemption from state income tax on Social Security income if you meet certain income requirements in 2026. If you are married and filing jointly, Social Security income is tax-exempt if your AGI is $70,000 or less. The same applies to single and married filing jointly filers who qualify for a full exemption if earning $55,000 or less.

The hope is that state taxes on Social Security will one day disappear, forever, across all 50 states, but they are not gone yet. If you live in one of these eight states, understanding exemption thresholds is the key to good planning. .