Social Security benefits are built on decades of work and payroll tax contributions, which is why taxes on those checks can feel especially frustrating for retirees. Many Americans spend their entire careers paying into the system, then discover in retirement that part of their benefit may still be taxable.
A recent tax change gives many older Americans some relief, but it does not eliminate federal taxes on Social Security. The One Big Beautiful Bill Act created a temporary additional deduction of $6,000 for taxpayers age 65 and older, or $12,000 for married couples if both spouses qualify. The deduction applies for tax years 2025 through 2028 and phases out for taxpayers with modified adjusted gross income above $75,000 for single filers and $150,000 for joint filers.
That means many retirees will owe less to the IRS, and some will owe no federal tax on their benefits at all. But the underlying Social Security tax rules are still in place. The new deduction simply reduces taxable income for eligible seniors, creating a temporary window of relief that is scheduled to expire after 2028.
State taxes are a separate issue. Most states do not tax Social Security benefits, but a small group still does in 2026. The eight states are Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont, though many offer exemptions, deductions, or credits based on income, age, or filing status.
For retirees, that distinction matters. A state that taxes Social Security may not affect every recipient, but it can still change the math for households with pensions, IRA withdrawals, investment income, or higher annual benefits. If you are deciding where to retire or trying to estimate your after-tax income, knowing which states still tax Social Security is an important part of the plan.
The eight states that still tax Social Security in 2026
The list of states taxing Social Security has shrunk considerably in recent years. West Virginia, for example, completed a three-year phase-out of its Social Security tax in 2026, joining the growing majority of states that leave benefits untouched. Missouri, Kansas, and Nebraska made similar moves in prior years.
As of 2026, the following eight states continue to tax Social Security income:
- Colorado
- Connecticut
- Minnesota
- Montana
- New Mexico
- Rhode Island
- Utah
- Vermont
Living in one of these states does not automatically mean you will pay tax on your benefits. Most offer exemptions or credits that shield moderate and lower-income retirees. Minnesota, for instance, exempts benefits for residents with adjusted gross incomes up to $86,410 (single) or $110,780 (joint filers) for 2026. Vermont provides a full exemption for single filers with AGI up to $55,000 and joint filers with AGI at or below $70,000. Higher earners, though, often face state-level taxation on at least a portion of their Social Security income.
Should you relocate to avoid state taxes on Social Security?
If your state imposes taxes on Social Security benefits, relocating before you claim might seem appealing. Before house hunting, take a moment to evaluate the bigger picture.
First, check whether you will actually owe tax. Many of the eight states that tax benefits exempt retirees below certain income thresholds. Depending on your adjusted gross income and filing status, you may qualify for full or partial relief without ever leaving your current home.
Second, compare the overall cost of living across states. New Mexico, for instance, has a cost of living about 7% below the national average, according to multiple regional cost indices. Even if you pay state tax on Social Security there, total expenses may come out lower than in a nominally tax-free state with higher property taxes, housing costs, or everyday prices.
Third, consider what you would give up by moving. Social connections, proximity to family, and established support networks become increasingly valuable in retirement. Uprooting yourself in your later years can mean rebuilding a social life at precisely the stage when access to trusted relationships and nearby help with medical appointments or home maintenance matters most.
That said, some states on this list are expensive places to retire. Vermont carries a top marginal income tax rate of 8.75%, among the highest in the country, and taxes all forms of retirement income above its exemption thresholds. Minnesota is even steeper, with a top rate of 9.85% for those in the highest bracket, which kicks in above approximately $183,000 for single filers.
If your state combines high income taxes with elevated property taxes and a significant overall cost of living, relocating to a lower-tax state could make financial sense over a long retirement. States with no income tax at all (Texas, Florida, and Tennessee, for example) or those that exempt all retirement income can deliver substantial savings compounded across 20 or 30 years.
Do your homework before you move
Relocating for tax reasons is perfectly rational, but it should be a carefully researched decision rather than an impulsive one.
Focus on the total tax burden. Look at state income taxes, property taxes, sales taxes, and overall living expenses together. A state that taxes Social Security modestly might still be cheaper than one with no income tax but sky-high property assessments.
Evaluate your own income mix. If you have pension income, IRA distributions, or other retirement sources alongside Social Security, examine how each state treats those streams. Some states offer broad retirement income exemptions; others tax everything equally.
And keep in mind that Social Security taxation at the state level is often targeted at higher earners. If your total income is modest, you may owe little or nothing even in a state that technically taxes benefits. Moving in that scenario could cost more in disruption and relocation expenses than you would ever recover in tax savings.
Editor’s note: This revision adds the OBBBA’s July 4, 2025 signing date and the Council of Economic Advisors estimate that 88% of Social Security recipients will owe no federal tax under the new law. It also includes the OBBBA deduction phase-out thresholds ($75,000 single / $150,000 joint MAGI), 2026 Social Security exemption income thresholds for Minnesota and Vermont, and updates New Mexico’s cost-of-living differential to approximately 7% below the national average based on current regional price data.
The image featured at the top of this post is ©Egoitz Bengoetxea Iguaran from Getty Images and JJ Gouin from Getty Images.