The Social Security program is complex enough as is. Retirees can claim benefits at different ages, and the amount they are entitled to is based on the number of years worked, their career earnings, and when they claim benefits relative to their full retirement age (FRA).
However, another confusing aspect of the program is how Social Security benefits are taxed, particularly at the state level, where states can tax benefits at their discretion. Luckily, the bulk of the states in the U.S. choose not to tax Social Security benefits. Here is the list of 41 states that don't levy taxes on Social Security.
Nine states tax Social Security
Before I review the states that don't tax Social Security, let's examine the nine states that do tax benefits, with most of them applying different rates. Keep in mind that states' tax policies often change, and not all taxes are that punitive, due to certain exemptions. Here's the list of states that still tax Social Security:
- Colorado
- Connecticut
- Minnesota
- Montana
- New Mexico
- Rhode Island
- Utah
- Vermont
- West Virginia
Minnesota and Vermont tend to have the highest tax rates on Social Security. Minnesota's tax rates on benefits range from 5.35% to 9.85%. However, retirees can deduct some of their benefits from their adjusted gross income (AGI) if their AGI is below $108,320 for joint filers, or $84,490 for single filers or head of household. The deduction is phased out by 10% for each $4,000 of income over the above limits.
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Vermont's tax rates on benefits range from 3.35% to 8.75%. However, retirees are exempt if they have an AGI of no more than $65,000 for joint filers and $50,000 for all other filers. There is also a phase-out above these thresholds.
Meanwhile, many retirees in New Mexico are exempt from Social Security taxes, as single taxpayers with an income of under $100,000 and joint filers with less than $150,000 in income are exempt. West Virginia will soon no longer be on this list, and is in the process of phasing out Social Security taxes. Roughly 65% of Social Security benefits from this year will be exempt from state taxes, and then benefits will be fully exempt from state taxes for the 2026 tax year.
41 states that don't tax Social Security
Now to the extensive list of 41 states that don't tax Social Security, and the District of Columbia:
- Alabama
- Alaska
- Arizona
- Arkansas
- California
- Delaware
- Florida
- Georgia
- Hawaii
- Idaho
- Illinois
- Indiana
- Iowa
- Kansas
- Kentucky
- Louisiana
- Maine
- Maryland
- Massachusetts
- Michigan
- Mississippi
- Missouri
- Nebraska
- Nevada
- New Hampshire
- New Jersey
- New York
- North Carolina
- North Dakota
- Ohio
- Oklahoma
- Oregon
- Pennsylvania
- South Carolina
- South Dakota
- Tennessee
- Texas
- Virginia
- Washington
- Wisconsin
- Washington, D.C.
- Wyoming
Retirees must still pay federal taxes on Social Security
Now, just because someone doesn't have state taxes on Social Security, there is still a chance they will have to pay federal taxes. This depends on a person's combined income, which is AGI plus nontaxable interest and one-half of Social Security benefits. As a reminder, AGI includes wages, interest, dividends, pension payments, and taxable distributions from retirement accounts.
Single filers with a combined income of up to $25,000 don't pay taxes. Single filers making between $25,000 and $34,000 will pay taxes on up to half of their benefits, while over $34,000 in combined income will warrant taxes on 85% of benefits. These are not the specific tax rate, but the percentage of benefits that could be subject to taxation. For joint filers, the thresholds are $32,000 for no tax, $32,000 to $44,000 for half of one's benefits being taxed, and over $44,000 for 85% of one's benefits being taxed.
The good news for seniors is that President Donald Trump's new tax law introduced a temporary senior deduction, allowing taxpayers who are 65 or older to claim a $6,000 deduction for tax years 2025 to 2028. Joint filers can each claim the deduction, although the deduction is lowered by 6% for AGIs above $75,000 for single filers or $150,000 for joint filers.
While this is not a specific Social Security deduction, the White House Council of Economic Advisors estimates that only 12% of seniors will be required to pay taxes on Social Security as a result of the deduction.
