Social Security Taxation by State: Where Your Benefits Are Tax-Free

Most retirees already know the federal government can tax up to 85% of their Social Security benefits. What catches people off guard is that 9 states pile on their own income tax on top of that.

In 2026, 41 states and Washington D.C. fully exempt Social Security benefits from state income tax. If you live in one of the 9 that still tax them, the difference can easily exceed $1,500 per year for a middle-income retiree.

The 9 States That Still Tax Social Security

As of 2026, these states impose some form of state income tax on Social Security benefits:

• Colorado — Taxes benefits but exempts the first $24,000 of federally taxable retirement income for residents 65 and older
• Connecticut — Exempts benefits for single filers under $75,000 AGI and joint filers under $100,000; above those thresholds, up to 25% of benefits are taxable
• Minnesota — One of the toughest states for Social Security taxation; benefits follow federal inclusion rules with only a partial subtraction for lower-income filers
• Montana — Taxes Social Security with a modest exemption; the state's flat 5.9% income tax rate applies to included benefits
• New Mexico — Exempts benefits for single filers under $100,000 and joint filers under $150,000; above that, benefits are fully taxable
• Rhode Island — Exempts benefits at full retirement age if AGI is under $101,000 (single) or $126,000 (joint); otherwise taxed at rates up to 5.99%
• Utah — Offers a tax credit rather than an exemption; the credit phases out at higher incomes, leaving many retirees with a real tax bill
• Vermont — Exempts benefits for single filers under $50,000 and joint filers under $65,000; above those thresholds, benefits are fully included
• West Virginia — Was phasing out Social Security taxation but as of 2026 still retains partial taxation for higher-income filers

Minnesota and Vermont hit retirees hardest because their exemption thresholds are low relative to average Social Security income. A couple receiving $40,000 in combined benefits clears Vermont's $65,000 joint exemption the moment they add any pension or IRA withdrawal.

The 41 States Where Benefits Are Fully Exempt

The majority of the country leaves Social Security alone at the state level. That includes the nine states with no income tax at all, Texas, Florida, Nevada, Wyoming, South Dakota, Alaska, Washington, Tennessee, and New Hampshire, where the question never comes up.

But it also includes states with broad income taxes that specifically carve out Social Security. Iowa moved to a flat 3.8% income tax rate and fully exempts Social Security benefits. Illinois, despite its 4.95% flat income tax, exempts virtually all retirement income including Social Security. Pennsylvania exempts Social Security entirely along with most pension and 401(k) distributions after age 59.5.

For a deeper look at how these states stack up on overall retirement tax burden, see our guide to the best states for retirees to avoid taxes.

Federal Taxes Still Apply Everywhere

Clearing your state's Social Security tax doesn't solve the federal problem. If your combined income (adjusted gross income plus nontaxable interest plus half your Social Security benefits) exceeds $25,000 for single filers or $32,000 for joint filers, up to 50% of your benefits are federally taxable. Above $34,000 single or $44,000 joint, up to 85% becomes taxable.

Those thresholds have not been indexed for inflation since they were set in the 1980s and 1990s. In practice, most retirees with any additional income beyond Social Security cross them. Living in a state that exempts benefits from state tax still saves real money, but federal exposure is unavoidable for most recipients.

The New $6,000 Senior Deduction in 2026

The Tax Relief for American Families and Workers framework created a new $6,000 above-the-line deduction for Americans age 65 and older, effective for tax year 2026. This deduction reduces federal AGI, which in turn can reduce or eliminate state income tax exposure in states that use federal AGI as the starting point for their own calculations. Retirees in states like Connecticut and Rhode Island should recalculate their 2026 exposure, since lower AGI may push them below the exemption thresholds. Work through the math with a tax professional or use our state tax calculator to model your specific situation.

For a full picture of how state taxes interact across income types, the states that don't tax Social Security breakdown and the capital gains tax by state guide are worth reading together.

Key Takeaways

• 41 states plus D.C. fully exempt Social Security benefits from state income tax in 2026; 9 states still tax them to some degree
• Minnesota, Vermont, and Utah are the most punishing for middle-income retirees, with low exemption thresholds or phasing credits that disappear quickly
• The new $6,000 senior deduction for 2026 reduces federal AGI, which can help retirees in states that tie exemption eligibility to income thresholds

Compare your current state against retirement alternatives on Live or Die Here to see exactly what you keep.