Did you know that where you live could determine whether you pay taxes on your Social Security benefits in retirement? It’s true—and it could make or break your financial plans for 2026. While most states leave your Social Security checks untouched, a handful still impose taxes on them, potentially shrinking your retirement income. And this is the part most people miss: even in these states, the rules are far from straightforward, with exemptions, thresholds, and phaseouts that can dramatically affect how much you owe. Let’s dive into the details for the 8 states that still tax Social Security, and explore how their 2026 rules could impact your wallet.
But here’s where it gets controversial: Should states tax Social Security at all? Some argue it’s double taxation, while others see it as a necessary revenue stream. What do you think? Let’s discuss in the comments!
1. Colorado
Colorado has become increasingly retiree-friendly when it comes to Social Security taxes. Starting in 2025, and continuing into 2026, many residents aged 65 and older can subtract 100% of their federally taxable Social Security benefits from their state taxable income. For those aged 55–64, the same exemption applies if your federal adjusted gross income (AGI) is below $75,000 (single) or $95,000 (married filing jointly). Even higher-income earners in this age group can subtract up to $20,000 of their benefits. If you’re under 55, though, you’re out of luck—no special subtraction applies. After any deductions, Colorado taxes the remaining income at a flat 4.4% rate.
2. Connecticut
On paper, Connecticut taxes Social Security, but in practice, most retirees pay nothing. In 2026, if your federal AGI is below $75,000 (single) or $100,000 (married filing jointly), you won’t owe a dime in state taxes on your federally taxable Social Security. Above these thresholds, Connecticut taxes up to 25% of your benefits, treating them as ordinary income and taxing them at rates up to 6.99%.
3. Montana
Montana taxes Social Security as ordinary income but offers a small break for retirees aged 65 and older. In 2026, you can subtract $5,660 from your income, which can offset federally taxable Social Security. If you’re under 65, there’s no such break, and all taxable benefits are subject to state tax. Montana’s income tax rates range from 4.7% to 5.65%, depending on your income level.
4. New Mexico
New Mexico is one of the most generous states when it comes to Social Security exemptions. In 2026, if your income is below $100,000 (single) or $150,000 (married filing jointly), you owe no state tax on your benefits. Above these thresholds, only the taxable portion of your benefits is subject to New Mexico’s income tax rates, which range from 1.7% to 5.9%.
5. Rhode Island
Rhode Island only exempts Social Security for retirees who meet both an age and income test. You must be at full retirement age (typically 66 or 67) and have a federal AGI below the state’s limits—around $107,000 for single filers and $133,750 for married couples in 2025. These thresholds adjust annually. If your income exceeds the limit, Rhode Island taxes the federally taxable portion of your benefits at rates up to 5.99%.
6. Vermont
Vermont taxes Social Security for higher-income retirees but offers exemptions for lower earners. In 2026, all benefits are exempt if your income is below $65,000 (single) or $75,000 (joint). Above these levels, the exemption phases out, and higher earners may see all federally taxable benefits taxed at rates up to 8.75%.
7. Utah
Utah taxes Social Security at a flat 4.65% rate, but most retirees avoid this tax through a refundable credit. You pay tax on the same portion of Social Security taxed federally, then apply the Social Security Benefits Credit. The full credit is available for incomes up to $45,000 (single) or $75,000 (married filing jointly), with a $37,500 limit for married filing separately. The credit phases out above these levels, but at lower incomes, it fully offsets the tax.
8. Minnesota
Minnesota only taxes Social Security if it’s taxed federally, and its generous exemptions mean many retirees pay nothing. In 2026, all federally taxable Social Security is exempt if your AGI is $108,320 or less (married filing jointly) or $84,490 or less (single or head of household). Above these thresholds, the exemption phases out gradually, and any taxable portion is subject to Minnesota’s income tax rates, which can reach 9.85%.
West Virginia Drops Off the List in 2026
Good news for West Virginia retirees: starting in 2026, the state will fully exempt Social Security benefits from state taxes, regardless of income. This marks the end of a multi-year phaseout of the tax.
Bottom Line
Most states don’t tax Social Security, but if you live in one of these 8 states, it’s crucial to understand the rules. Even in these states, many retirees pay nothing if their income stays below exemption thresholds. However, the rules are complex and can change annually, so it’s wise to check your state’s current laws before filing. A little planning can help you keep more of your hard-earned retirement income.
Thought-provoking question: Should states be allowed to tax Social Security at all, or is it an unfair burden on retirees? Share your thoughts below!
For more insights, explore these resources:
- Are you on track for retirement? Take this quiz and find out.
- 14 benefits seniors are entitled to but often forget to claim.
- $1,000,000 saved? Download this free guide to learn 7 ways to generate retirement income.
