Are Your Social Security Benefits Taxed? Here Are the 8 States to Watch

Retirement planning is often described as a three-legged stool, with savings, pensions, and Social Security forming the base. However, for many seniors living in the United States, a fourth variable often wobbles that stool unexpectedly: taxation. While most people are aware that the federal government may take a cut of their monthly checks if their income is high enough, fewer realize that their state government might also want a piece of the pie. As we settle into 2026, the landscape of state taxation has shifted significantly, leaving a shrinking list of locations where your benefits are still fair game for the tax collector.

The Federal Baseline and State Trends

Before diving into state-specific laws, it is crucial to understand the federal rules that apply regardless of your zip code. The IRS uses a specific calculation involving your “combined income” to determine taxability. If you are a single filer with a combined income between $25,000 and $34,000, you may have to pay income tax on up to 50% of your benefits. Above that threshold, up to 85% of your benefits can be taxed. For years, many states simply mirrored these federal rules. However, in a wave of recent legislation, states like Missouri, Nebraska, and Kansas have completely eliminated this tax. West Virginia has also joined the tax-free club for income earned in 2026, officially dropping off the “watch list” and leaving just eight states that still impose some form of tax on Social Security.

Who Is Still Taxing Benefits in 2026?

The remaining eight states—Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont—do not tax everyone equally. Unlike the federal government, which has not adjusted its thresholds for inflation in decades, most of these states offer generous exemptions that protect low-to-middle-income retirees. The tax is generally aimed at wealthier seniors, though the definition of “wealthy” varies wildly from one border to the next. For residents in these areas, the key is understanding the specific Adjusted Gross Income (AGI) caps that trigger the tax.

The “Cliff” Effect and Western States

In the western cluster of states, the rules can be particularly complex. Colorado is arguably the most retiree-friendly of the bunch, having recently expanded its rules so that those aged 65 and older pay zero state tax on their federally taxable Social Security benefits. The burden now falls primarily on early retirees aged 55 to 64. Utah takes a different approach entirely; rather than deducting the income, it offers a tax credit to offset the liability. However, this credit phases out for higher earners, meaning those with substantial retirement savings or part-time work income might still see a reduction in their final benefit amount.

The Northeast Corridor

Moving to the Northeast, Connecticut, Rhode Island, and Vermont maintain taxes that can catch retirees off guard, though they have raised their thresholds in recent years. Vermont has one of the strictest caps; single filers earning over $50,000 might see a portion of their benefits taxed, which is a relatively low bar compared to its neighbors. Rhode Island adds another layer of complexity by requiring you to have reached your full retirement age (typically 67) to qualify for their exemption. If you retire early in the Ocean State, your benefits are fully taxable by the state until you hit that age milestone, regardless of income.

Minnesota: The Outlier

Minnesota often stands out in these discussions because its tax structure has been the subject of intense legislative debate. While the state offers a substantial subtraction that eliminates the tax for many, it still uses a “provincial income” calculation that can result in a tax bill for upper-middle-class retirees. Unlike states that have a simple “all or nothing” cliff, Minnesota’s subtraction phases out, which creates a window where earning an extra dollar of income can have a disproportionate tax effect. For high-income earners in the Land of 10,000 Lakes, Social Security benefits remain partially taxable, making tax-efficient withdrawal strategies from 401(k)s essential.

Strategic Planning for 2026

If you reside in one of these eight states, panic is rarely necessary. The vast majority of retirees will fall under the exemption thresholds listed above. However, if you are on the borderline—perhaps due to a required minimum distribution (RMD) or the sale of a property—it might be worth consulting a tax professional. Sometimes, shifting income between years or managing capital gains can keep your Adjusted Gross Income low enough to preserve your Social Security exemption. As the list of states taxing these benefits continues to shrink, the remaining laws become more idiosyncratic, requiring a sharp eye to navigate successfully.

SOURCE

Social Security 2026: What You Need to Know About Working While Receiving Benefits

FAQs

Q1 Does West Virginia still tax Social Security benefits?

No. As of the 2026 tax year, West Virginia has fully phased out its tax on Social Security benefits. While you may still see it on prior-year returns filed in early 2026, income earned from January 1, 2026, onward is tax-free.

Q2 Do these states tax 100% of my check?

Rarely. Most states only tax the portion of your benefit that the federal government considers taxable (usually up to 85%), and then apply their own exemptions or credits on top of that.

Q3 Will moving to a tax-free state save me money?

Not necessarily. You must look at the “total tax burden,” including property taxes, sales taxes, and cost of living. A state with no income tax might have significantly higher property levies that outweigh the savings on your Social Security check.

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