A recent update from GO BankingbRates reveals a major shift in how states are taxing Social Security benefits. By 2025, a total of 41 states in the U.S. will no longer tax Social Security benefits. This change comes as Missouri and Kansas joined the list of tax-free states in 2024, leaving just nine states that will continue taxing Social Security benefits. For retirees, this is an important development as it impacts how they plan their finances in the coming years. Here’s a closer look at the states that will still impose taxes on Social Security benefits in 2025, along with key exemptions for qualifying residents:
States Still Taxing Social Security Benefits in 2025
Utah
Residents earning below $30,000 (single filers) or $50,000 (married couples) are exempt from taxes on their Social Security benefits.
Minnesota
Individuals with an AGI (Adjusted Gross Income) below $82,190, or married couples earning less than $105,380, won’t be taxed on Social Security benefits.
Colorado
Residents between 55 to 64 years old can fully deduct their federally taxed Social Security benefits if their AGI is below $75,000 (individuals) or $95,000 (couples).
Rhode Island
If your AGI is less than $88,950 (individuals) or $111,200 (couples), you’ll pay no state taxes on your Social Security benefits.
Connecticut
Single filers with an AGI under $75,000 or married couples making less than $100,000 are exempt from paying state taxes on their Social Security benefits.
New Mexico
Individuals with earnings under $100,000 or married couples earning less than $150,000 annually won’t be taxed on Social Security benefits.
Montana
In Montana, single filers with an AGI under $25,000 or couples filing jointly with an AGI below $32,000 are exempt from taxes on their Social Security benefits.
Vermont
Married couples with an income below $65,000 or individuals earning less than $50,000 annually will not be taxed on Social Security benefits.
West Virginia
Individuals earning under $50,000 and couples with incomes below $100,000 currently pay no state taxes on Social Security benefits. West Virginia is gradually phasing out its state tax on Social Security benefits, with a 35% reduction in 2024, 65% in 2025, and complete elimination by 2026.
What Does This Mean for Retirees?
For retirees across the U.S., these changes represent a significant financial shift. With 41 states no longer taxing Social Security benefits by 2025, more seniors can expect to retain a larger portion of their retirement income. Those still residing in the nine states that will impose taxes can potentially reduce their tax burden by meeting specific exemptions or income thresholds.
This tax reform provides retirees with more clarity and savings opportunities as they plan for a comfortable and secure future. If you live in one of the states that still taxes Social Security benefits, it’s crucial to stay informed about your state’s specific tax laws and exemptions to make the most of this shift.
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