These 9 States Still Tax Social Security in 2025, What Retirees Need to Know

For the more than 71 million Americans receiving Social Security benefits, 2025 will bring a welcome financial boost in many states. As the cost of living continues to rise, the relief comes not from a federal change but from state-level tax policy.

According to the latest data, 41 states and Washington, D.C. will not impose state income taxes on Social Security benefits in 2025. This means retirees living in those jurisdictions can stretch their retirement dollars further, preserving more of their checks for essentials like housing, healthcare, and groceries.

In contrast, nine states will continue to tax benefits either partially or fully—though even in these states, exemptions and credits help shield lower-income seniors. The shift underscores a broader national trend of states phasing out taxation on retirement benefits, driven by both economic pressure and political momentum.

Federal vs. State Taxation – Understanding the Basics

At the federal level, Social Security benefits can be taxed on up to 85% of total income, depending on a retiree’s combined income. This policy hasn’t changed for decades, and for many middle- and high-income retirees, it means a significant portion of benefits is taxed.

But at the state level, policies differ dramatically:

• Some states never tax income at all, meaning benefits are automatically safe.
• Others tax wages and pensions but carve out full exemptions for Social Security.
• The remaining states apply partial or income-based taxation, often phasing out exemptions as income rises.

In practice, where retirees live can determine whether they keep an extra \$1,000–\$3,000 or more each year.

Nine States Still Taxing Social Security in 2025

Despite the overall shift toward exemption, nine states will continue some form of Social Security taxation in 2025. The approaches differ, but all include income-based thresholds or credits that limit the impact for low- to middle-income seniors.

State	Taxation Policy in 2025	Key Notes
Colorado	Exempts benefits for those 65+; partial exemptions at 55–64	Income thresholds apply
Connecticut	Full exemption below \$75,000 (single) or \$100,000 (joint)	Above threshold, partial taxes apply
Minnesota	Partial exemption; phases out at higher incomes	Uses subtraction system
Montana	Taxes benefits under state income tax rules	Small deductions allowed
New Mexico	Full exemption for lower-income retirees; partial taxation above thresholds	One of the broadest tax bases historically
Rhode Island	Exempts low- and middle-income seniors	Above limits, portion is taxable
Utah	Follows federal rules but offers credits	Non-refundable credit offsets taxes for eligible incomes
Vermont	Full exemption under \$50,000 (single) or \$65,000 (joint)	Gradual phase-in of taxation at higher incomes
West Virginia	Partial exemption in 2025; full exemption starts 2026	Transitional year

The presence of income-based exemptions means many seniors in these states will still pay little to no tax. However, wealthier retirees could see hundreds or even thousands of dollars in additional state tax liability.

States Offering Complete Relief – Where Social Security Is Untaxed

In 2025, retirees will find the most favorable tax treatment in 41 states plus Washington, D.C. These jurisdictions either have no state income tax or explicitly exclude Social Security benefits from taxable income.

States with No State Income Tax

• Alaska
• Florida
• Nevada
• South Dakota
• Tennessee
• Texas
• Washington
• Wyoming

States with Income Tax but Full Social Security Exemption

• Alabama
• Arizona
• Arkansas
• California
• Delaware
• Georgia
• Hawaii
• Idaho
• Illinois
• Indiana
• Iowa
• Kansas
• Kentucky
• Louisiana
• Maine
• Maryland
• Massachusetts
• Michigan
• Mississippi
• Missouri
• Nebraska
• New Jersey
• New York
• North Carolina
• North Dakota
• Ohio
• Oklahoma
• Oregon
• Pennsylvania
• South Carolina
• Virginia
• Wisconsin

Washington, D.C. also grants full exemption.

This broad exemption landscape highlights a clear policy trend: states are increasingly aligning with the idea that Social Security should not be taxed at the state level, especially as inflation eats away at retiree purchasing power.

Recent Policy Changes – A Nationwide Shift

Several states have recently acted to ease or eliminate Social Security taxation:

• Missouri – Eliminated state taxation of benefits beginning in 2024.
• Nebraska – Fully exempted benefits starting in 2025.
• Kansas – Introduced laws phasing out taxation as of 2025.
• West Virginia – On track for full exemption in 2026, after partial relief in 2024–2025.

These moves reflect growing recognition that retirees are more vulnerable to economic pressure, particularly with healthcare, housing, and utility costs surging nationwide. Lawmakers have framed such changes not only as tax relief but also as a strategy to retain retirees who might otherwise relocate to more tax-friendly states.

• In a state with a 5% income tax, they could lose \$1,500 each year.
• Over a 20-year retirement, that totals \$30,000 in extra taxes—roughly the value of an entire year of benefits.

On a collective level, the impact is even greater:

• Missouri retirees saved an estimated \$309 million annually after the state scrapped taxation.
• Nebraska seniors now save about \$17 million per year after its 2025 policy change.

These savings are typically redirected into local economies, as retirees spend more on healthcare, groceries, housing, and leisure within their communities.

Why Some States Still Tax Benefits

If the trend favors exemption, why do nine states continue taxation? The answer is largely financial.

State governments argue that removing this revenue source could widen budget gaps, particularly in states with smaller tax bases. Some also emphasize that their systems target higher-income retirees, ensuring that those with modest means remain shielded.

For example, Connecticut’s income thresholds protect middle-class seniors while ensuring that retirees with incomes exceeding six figures continue contributing to state coffers. Similarly, Utah offsets federal taxation with state-level credits, softening the impact without eliminating the tax entirely.

What This Means for Retirees Considering Relocation

For retirees weighing relocation, tax policy is only one piece of the puzzle. Housing affordability, healthcare access, and overall cost of living matter equally.

However, state income tax on Social Security benefits can tip the scales, especially for seniors who rely heavily on their monthly checks. Retirees in high-cost states that tax benefits may find compelling financial incentives to move to tax-free states.

Still, experts caution that moving solely for tax benefits can backfire if other expenses, like housing or healthcare, are significantly higher in the new state. The best strategy is to evaluate the full cost-of-living equation.

5 FAQs

Q1: How many states will tax Social Security benefits in 2025?
A1: Nine states will continue to tax benefits in some form—Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia (phasing out by 2026).

Q2: Which states offer the most retiree-friendly tax policies?
A2: States with no income tax—like Florida, Texas, and Wyoming—or those with full Social Security exemptions, such as California, New York, and Pennsylvania.

Q3: How much can retirees save by living in a state without Social Security taxes?
A3: Depending on income, savings can range from a few hundred to several thousand dollars annually. A retiree receiving \$30,000 could save about \$1,500 a year in a 5% tax state.

Q4: Why do some states still tax Social Security?
A4: Budgetary needs. States often argue taxation ensures higher-income retirees contribute revenue, while lower-income retirees are shielded with exemptions or credits.

Q5: Will more states eliminate Social Security taxation in the future?
A5: Likely yes. With political momentum and inflation concerns, more legislatures are considering full exemptions to support seniors.