Social Security benefits provide essential financial support for millions of American retirees. However, the taxability of these benefits varies significantly across U.S. states. While the federal government taxes Social Security benefits based on income thresholds, state-level taxes can create additional complexity for retirees.
As we move toward 2026, understanding which states will tax Social Security benefits is crucial for planning purposes.
The Federal Tax Landscape
Before diving into state-specific rules, it’s important to clarify how Social Security benefits are taxed at the federal level. Social Security income is taxed depending on a retiree’s “combined income,” which includes adjusted gross income, nontaxable interest, and half of the Social Security benefits received.
If the combined income exceeds certain thresholds, up to 85% of Social Security benefits may be subject to federal taxes.
States That Will Tax Social Security Benefits in 2026
In 2026, only a handful of states will tax Social Security benefits. These states generally assess taxes based on income levels, which means the more you earn, the higher the likelihood that your benefits will be taxed. Here are the states that will continue to impose taxes on Social Security benefits in 2026:
- Colorado
- Connecticut
- Minnesota
- Montana
- New Mexico
- Rhode Island
- Utah
- Vermont
Each of these states applies its own formulas and exemptions, with some offering tax breaks for retirees with lower incomes. While not all Social Security benefits may be taxed, high earners in these states should prepare for the possibility of taxation.
States That Do Not Tax Social Security Benefits
Fortunately, the majority of U.S. states do not tax Social Security benefits. As of 2026, 41 states and the District of Columbia do not tax Social Security income at the state level. This includes several states with no state income tax at all, making them particularly attractive for retirees seeking to maximize their benefits.
The list of states that do not tax Social Security benefits includes:
- Alaska
- Florida
- Nevada
- South Dakota
- Texas
- Washington
- Wyoming
Additionally, several other states that impose income tax offer full exemptions for Social Security benefits, such as:
- California
- Illinois
- New Jersey
- Pennsylvania
- South Carolina
Retirees in these states can enjoy the benefit of not having to worry about additional state taxes on their Social Security income.
Changes in Tax Policy: What to Expect by 2026
In recent years, some states have made efforts to simplify the tax rules related to Social Security benefits. For instance, West Virginia will phase out the taxation of Social Security benefits by 2026, providing significant relief to retirees. However, the rules can be complex and often depend on income thresholds.
It’s important to note that some states, like Minnesota, have a sliding scale where a portion of Social Security benefits is exempt from taxation depending on the taxpayer’s income. For retirees in these states, it is essential to monitor updates to the state’s tax laws in order to fully understand how benefits may be affected.
Some states have implemented strategies to phase out the taxability of Social Security benefits entirely over time. For example, West Virginia and Oklahoma are leading the way with gradual elimination strategies, which might offer relief to future retirees in these states.
Understanding State Taxation Thresholds
Many states tax Social Security benefits only if a retiree’s income exceeds a certain level, often referred to as the income threshold. These thresholds can vary dramatically by state, and understanding them is key to determining whether your Social Security benefits will be taxed.
- Example: Connecticut
In Connecticut, Social Security benefits are subject to taxation only if a taxpayer’s federal adjusted gross income exceeds $75,000 for individuals or $100,000 for married couples. The taxability increases with higher levels of income, potentially affecting a significant portion of retirees in higher-income brackets. - Example: Minnesota
In Minnesota, the state’s tax rules allow for a portion of Social Security benefits to be exempt based on income. For example, retirees with low income may see a large portion of their Social Security benefits remain untaxed, but this exemption decreases as income rises.
These state-specific thresholds highlight the complexity of Social Security taxation and underscore why it is important for retirees to understand their state’s specific laws.
Planning for 2026: Navigate State Tax Rules
Retirees should factor state tax laws into their retirement planning. While some states exempt Social Security benefits from taxation, others tax them to varying degrees based on income. Here are a few tips for retirees:
- Check your state’s tax rules: States like Colorado and Minnesota impose taxes based on income, so the more you earn, the higher the likelihood of taxation. Understanding the thresholds for taxation can help you plan your withdrawals accordingly.
- Consider relocation: If you’re living in a state that taxes Social Security benefits, consider relocating to one of the tax-friendly states, such as Florida or Texas, where your Social Security income will be fully exempt from state taxes.
- Monitor state tax changes: State tax policies evolve, and some states may adjust their approach to Social Security benefits over time. Staying informed about potential legislative changes will help retirees adjust their financial strategies.
- Consult a tax professional: Tax laws can be intricate, especially when it comes to Social Security benefits. Consulting with a financial advisor or tax professional can help ensure that you are making the most of available exemptions and deductions.
As more Americans approach retirement, understanding the taxability of Social Security benefits by state becomes crucial for long-term financial planning. While the federal tax rules on Social Security remain relatively consistent, the state-level landscape is diverse and subject to change.
For retirees, staying informed about tax rules in their state can make a significant difference in the amount of income they retain in retirement.
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Additional Context on State Taxation: The Bigger Picture
Understanding the bigger picture of state tax rules is important for retirees who may find themselves choosing between states based on tax implications. Relocation could offer savings in the long term, but it’s also essential to consider cost of living, healthcare, and other factors that influence retirement.
In the future, it is likely that we will see more states reevaluate their stance on taxing Social Security benefits in light of an aging population and growing fiscal needs. With tax policies at the state level continuously shifting, it’s always wise to stay informed and review your financial strategy regularly to avoid surprises when tax season arrives.
FAQs About Social Security Tax Rules by State
Q: Will all Social Security benefits be taxed at the state level?
A: Not all Social Security benefits are taxed in every state. Many states fully exempt Social Security benefits from taxation, while others tax them based on income thresholds.
Q: How can I plan for Social Security taxes in 2026?
A: Retirees should monitor both federal and state tax rules, especially any changes in state laws that may affect Social Security taxation. It is also recommended to consult a financial advisor to optimize your tax strategy
