Be aware of the states where your Social Security will be taxed.
For many retirees, Social Security is a critical source of income, making state taxes on these benefits an important consideration when choosing where to live. While most states don’t tax Social Security, a handful still do, cutting into the financial security of their retirees.
As tax laws continue to evolve, understanding where your benefits might be subject to state taxation can help you make informed decisions about retirement planning.
Here are nine states that will still tax Social Security benefits in 2025.
1. Colorado will continue taxing Social Security benefits despite offering deductions.
Colorado imposes state taxes on Social Security benefits, though it does offer deductions and exemptions for some retirees, according to Natalie Missakkian of AARP. Individuals over 65 can deduct up to $24,000 in retirement income, which helps lower-income seniors, but higher earners may still owe state taxes. This makes Colorado a mixed option for retirees who rely on Social Security.
Although Colorado has no estate or inheritance tax, its cost of living and property taxes are relatively high. While some retirees may benefit from available deductions, those with additional income should carefully consider how state tax policies will affect their retirement finances.
2. Connecticut will tax Social Security benefits for higher-income retirees.
Connecticut does not tax Social Security benefits for retirees earning below a specific threshold, as reported by Heather Poole of Connecticut.Gov. However, individuals making over $75,000 and couples earning more than $100,000 must pay state taxes on their benefits. This income-based taxation model makes Connecticut a less favorable choice for wealthier retirees.
The state also has high property taxes and a generally high cost of living, which can further strain retirees’ budgets. Although Connecticut provides exemptions for other forms of retirement income, the taxation of Social Security remains a significant consideration for those planning their retirement finances.
3. Kansas will continue taxing Social Security benefits for moderate to high earners.
Kansas exempts Social Security income from state taxes for retirees earning less than $75,000 annually, according to Gabriell Cruz-Martines of Kiplinger. However, retirees exceeding this threshold must pay state income tax on their benefits, following federal taxation guidelines. This creates a financial burden for those with additional retirement income sources.
Beyond Social Security taxation, Kansas has relatively high property taxes, which can impact retirees on a fixed income. While the overall cost of living is lower than in many other states, retirees should weigh these factors carefully when deciding if Kansas is a tax-friendly retirement destination.
4. Minnesota will keep taxing Social Security income in 2025.
Minnesota is one of the few states that fully taxes Social Security benefits, though it offers partial exemptions for lower-income residents. If retirees owe federal taxes on their benefits, they are likely to owe state taxes as well. This taxation structure makes Minnesota a less attractive state for retirees relying primarily on Social Security.
While the state provides property tax relief programs for seniors, its high cost of living and additional income taxes can create financial challenges. Retirees should assess whether these tax policies align with their overall retirement planning before choosing Minnesota as their long-term home.
5. Montana will continue taxing Social Security benefits.
Montana follows some of the federal guidelines when taxing Social Security, meaning retirees could see up to 85% of their benefits taxed at the state level, as written by the writers of Unbiased. Lower-income retirees may qualify for partial exemptions, but those with moderate to high earnings will likely face taxation. This makes Montana a less tax-friendly state for retirees with significant Social Security income.
However, Montana does not have a state sales tax, which can help offset some of the financial burden. Property taxes are also relatively low, making it a reasonable option for some retirees. Those considering Montana should evaluate whether the overall tax structure aligns with their retirement income strategy.
6. Nebraska will still tax Social Security benefits until full exemption in 2027.
Nebraska has been gradually phasing out its tax on Social Security benefits, but in 2025, many retirees will still see their benefits taxed. The state plans to fully eliminate this tax by 2027, meaning those retiring in the next few years will still need to factor in these tax costs.
Aside from Social Security taxation, Nebraska has some of the highest property taxes in the country, which can add to retirees’ financial concerns. While future tax relief is on the horizon, those planning to retire soon may still face significant tax burdens.
7. New Mexico will continue taxing Social Security benefits with some exemptions.
New Mexico taxes Social Security benefits, but recent legislative changes have provided exemptions for lower-income retirees. Individuals earning below a certain threshold can exclude some or all of their benefits from taxation. However, middle- and high-income retirees may still owe state taxes on their benefits.
Despite these taxes, New Mexico has a relatively low cost of living and affordable property taxes compared to other states. Retirees should consider whether the overall tax structure, including Social Security taxation, makes financial sense for their long-term retirement plans.
8. Rhode Island will tax Social Security benefits for wealthier retirees.
Rhode Island imposes state taxes on Social Security benefits for individuals earning more than $95,800 and couples earning over $119,750. Retirees below these income thresholds can claim full exemptions, but those with higher earnings will see a portion of their benefits taxed.
However, Rhode Island does offer tax breaks on other types of retirement income, such as pensions. That said, with high property taxes and an above-average cost of living, retirees should carefully weigh whether Rhode Island’s tax policies align with their financial goals.
9. Vermont will tax Social Security benefits for higher income retirees.
Vermont has some of the strictest Social Security taxation policies in the country. The state follows federal taxation guidelines, meaning that up to 85% of Social Security benefits can be taxed. Only lower-income retirees qualify for partial exemptions, making Vermont one of the least tax-friendly states for retirees.
Beyond Social Security, Vermont has high state income and property taxes, which can create financial challenges for retirees. While the state offers beautiful landscapes and a strong community, the tax burden should be a key consideration for those looking to retire in Vermont.