Retirement often symbolizes financial freedom, but for some, taxes can throw a wrench into the works. As of 2025, retirees in the U.S. will find that 41 states and Washington, D.C. do not tax Social Security benefits. However, nine states—Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia—still tax these benefits. Let’s unpack what this means for retirees and how to make informed decisions.
Table of Contents
Taxation
Retiring in states like Florida, Texas, or Nevada has clear advantages. These states don’t tax Social Security, and many lack a state income tax altogether. That’s a win-win for retirees looking to maximize their income and minimize stress.
Taxing States
On the flip side, the nine states taxing Social Security claim the revenue supports vital public services and balances state budgets. While this may benefit the public, it’s a burden for retirees, especially those on fixed incomes. Middle- and upper-income retirees often feel the pinch the most, as they may not qualify for deductions or exemptions.
Federal Taxation
Even in states that don’t tax Social Security, federal taxes still apply. Retirees with a combined income above $25,000 for individuals or $32,000 for married couples may see up to 85% of their benefits taxed federally. Combined income includes adjusted gross income, nontaxable interest, and half of your Social Security benefits.
| Tax Thresholds | Individual Income | Married Income | Taxable Percentage |
|---|---|---|---|
| Low | Below $25,000 | Below $32,000 | 0% |
| Middle | $25,000–$34,000 | $32,000–$44,000 | Up to 50% |
| High | Above $34,000 | Above $44,000 | Up to 85% |
Planning
Tax planning can make a big difference in retirement. Here are strategies to consider:
- Time Withdrawals
Plan withdrawals from taxable accounts to avoid crossing federal tax thresholds. - Relocation
Moving to a state that doesn’t tax Social Security might save you a lot in the long run. - Leverage Deductions
Know your state’s specific tax rules to take advantage of available deductions. - Professional Advice
Financial advisors can provide tailored strategies to minimize your tax burden.
Pros and Cons
| Benefits of Non-Taxing States | Challenges in Taxing States |
|---|---|
| More take-home income | Higher financial burden for retirees |
| Easier to budget fixed incomes | Complexity in knowing tax rules |
| Attractive for retirees | Limited exemptions in some cases |
Taking Action
Knowing whether your state taxes Social Security can make or break your retirement budget. If you’re considering relocating, states like Florida and Texas offer tax advantages that can boost your income. Conversely, if you’re staying in a taxing state, proactive planning can soften the financial impact.
FAQs
Which states tax Social Security in 2025?
Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia.
How much Social Security is federally taxable?
Up to 85% if combined income exceeds federal thresholds.
What is combined income for Social Security?
Adjusted gross income, nontaxable interest, and half of Social Security benefits.
Do all non-taxing states lack state income tax?
No, but many non-taxing states like Florida also lack state income tax.
Can financial advisors help reduce Social Security taxes?
Yes, they can provide strategies to minimize taxable income.
