As of 2025, a significant shift will occur in how Social Security benefits are taxed across the United States. According to a recent report by GOBankingRates, 41 states will no longer tax Social Security benefits. With Missouri and Kansas eliminating taxes on these benefits in 2024, only nine states will continue to impose such taxes in 2025.
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If you’re planning your retirement finances, understanding where Social Security benefits remain taxable—and what exemptions apply—is crucial. Here’s an in-depth look at the nine states still taxing Social Security benefits in 2025 and the exemptions they offer.
The Nine States Taxing Social Security in 2025
1. Utah
- Exemption Thresholds:
- Single filers earning less than $30,000 annually.
- Married couples with incomes below $50,000.
- Residents below these income levels are fully exempt from paying state taxes on Social Security benefits.
2. Minnesota
- Exemption Thresholds:
- Individuals with an Adjusted Gross Income (AGI) under $82,190.
- Married couples earning less than $105,380.
- Those within these limits enjoy tax-free Social Security benefits.
3. Colorado
- Exemption Thresholds:
- Residents aged 55 to 64 with an AGI of:
- $75,000 or less for individuals.
- $95,000 or less for couples filing jointly.
- Residents aged 55 to 64 with an AGI of:
- Qualified residents can fully deduct federally taxed Social Security benefits.
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4. Rhode Island
- Exemption Thresholds:
- AGI below $88,950 for individuals.
- $111,200 for couples filing jointly.
- Residents meeting these income levels are exempt from state taxes on Social Security.
5. Connecticut
- Exemption Thresholds:
- Single filers with an AGI below $75,000.
- Couples earning less than $100,000.
- Qualifying residents won’t pay state taxes on Social Security benefits.
6. New Mexico
- Exemption Thresholds:
- Individuals earning under $100,000 annually.
- Married couples with incomes below $150,000.
- Social Security benefits are tax-free for those meeting these criteria.
7. Montana
- Exemption Thresholds:
- Single filers with an AGI below $25,000.
- Couples filing jointly with an AGI under $32,000.
- Benefits are fully exempt for those earning within these limits.
8. Vermont
- Exemption Thresholds:
- Individuals earning less than $50,000 annually.
- Married couples with incomes under $65,000.
- Residents below these thresholds avoid paying state taxes on Social Security benefits.
9. West Virginia
- Phase-Out Plan:
- Current exemption:
- Individuals earning less than $50,000.
- Couples with incomes below $100,000.
- Future reductions:
- 35% reduction in 2024.
- 65% reduction in 2025.
- Full elimination by 2026.
- Current exemption:
Planning Your Retirement Finances
For retirees, understanding where Social Security benefits remain taxable is essential for financial planning. These states’ exemptions often depend on income thresholds, making it vital to consider AGI and filing status.
The phase-out in West Virginia is particularly notable, as it reflects a broader trend toward eliminating Social Security taxes nationwide.
Why the Change Matters
The shift toward tax-free Social Security benefits in most states demonstrates growing awareness of retirees’ financial challenges. For those living in or considering a move to the nine remaining states that tax these benefits, understanding the nuances of exemptions can help optimize retirement income.
Stay informed and adjust your financial strategies to ensure a secure and tax-efficient retirement.
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