Social Security serves as a crucial lifeline for millions of Americans, particularly in retirement. According to AARP, about 40% of Americans aged 65 and older rely on Social Security for at least half of their income. However, where you live significantly impacts how much of your Social Security check you get to keep.
In addition to potential federal taxes—up to 85% of benefits are taxable depending on income—some states also tax Social Security. Fortunately, the number of states that impose these taxes is decreasing. By 2025, only nine states will continue to tax Social Security benefits.
Recent Changes in State Social Security Tax Policies
“The list of states that do not tax Social Security is much longer than those that do,” said Brian Kuhn, CFP, CLU, and SVP at Wealth Enhancement Group. “Each state sets its own rules, which can change over time.”
Recently, Missouri and Nebraska eliminated Social Security taxes, effective in 2024. Kansas also joined the movement, passing legislation in mid-2024 to stop taxing Social Security benefits moving forward.
The Nine States That Will Tax Social Security in 2025
As of 2025, these are the only states where Social Security benefits will still be subject to taxation:
- Colorado
- Connecticut
- Minnesota
- Montana
- New Mexico
- Rhode Island
- Utah
- Vermont
- West Virginia (phasing out taxes entirely by 2026)
In these states, provisions often exist to reduce or eliminate taxes for residents below certain income thresholds or of a specific age, making the tax burden more manageable for many retirees.
States That Won’t Tax Social Security in 2025
By contrast, 41 states—along with Washington, D.C.—will not tax Social Security benefits in 2025, based on current laws. These states include:
- Alabama
- Alaska
- Arizona
- Arkansas
- California
- Delaware
- Florida
- Georgia
- Hawaii
- Idaho
- Illinois
- Indiana
- Iowa
- Kansas
- Kentucky
- Louisiana
- Maine
- Maryland
- Massachusetts
- Michigan
- Mississippi
- Missouri
- Nebraska
- Nevada
- New Hampshire
- New Jersey
- New York
- North Carolina
- North Dakota
- Ohio
- Oklahoma
- Oregon
- Pennsylvania
- South Carolina
- South Dakota
- Tennessee
- Texas
- Virginia
- Washington
- Wisconsin
- Wyoming
Potential Savings for Retirees
The amount retirees save by living in states that don’t tax Social Security benefits can be substantial.
“For example, if your state’s effective tax rate is 5% and you receive $30,000 annually in Social Security benefits, you would save $1,500 in taxes,” Kuhn explained.
Even within states that tax Social Security, exemptions can apply. In Colorado, for instance, residents aged 65 and older can fully deduct federally taxed Social Security benefits on their state returns. Starting in 2025, this exemption will extend to individuals aged 55-64 earning less than $75,000 ($95,000 for couples).
The Broader Impact
These changes provide meaningful savings for retirees. According to Jeff Rose, CFP and founder of Good Financial Cents, Missouri retirees alone will save a collective $309 million annually due to the state eliminating Social Security taxes. In Nebraska, the figure stands at $17 million.
These policy shifts allow retirees to retain more of their hard-earned benefits, underscoring the importance of understanding state tax laws when planning for retirement.
