Retired U.S. adults are worried about the state taxes on their social security benefits in 2025. Although the payment of the Social Security, tax is a federal thing, the same kind of tax at the state level doesn’t apply.
However, residents in some states are still paying taxes, and this is affecting the retirement plan in 2025 of the individuals. As a U.S. citizen you should know the state laws and the system of taxation, along with the relevance of the matter to your area of residence.
By 2025, nine states would be the states to keep a hold on Social Security benefits tax. These are the states, Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia. While these states have different taxations altogether, some of them come with exemptions, others charge benefits after a few exceptions. Therefore, it is necessary to present the retired people with the correct laws in the respective states so as to avoid unexpected liabilities.
The Taxing States of Social Security Benefits and Their Regulations
The nine states that still tax Social Security benefits in 2025.
- Colorado: Provides deductions for Social Security benefits based on income thresholds.
- Connecticut: Taxation of Social Security benefits in this state depends on the amount of your adjusted gross income(AGI) and the filing status you have.
- Minnesota: Gives out first the taxed Social Security benefits to the retirees then later by way of subtractions.
- Montana: Only a limited number of people are exempt from paying tax on Social Security benefits and the income limits have been fixed.
- New Mexico: Have deemed the Social Security benefits not taxable by offering income ranges for which the benefits are exempt.
- Rhode Island: There are tax deductions only if Adjusted Gross Income is above a certain amount.
- Utah: Grants for taxes are provided for but also give a tax credit for Social Security benefits.
- Vermont: The income-based deduction with certain starting points is available.
- West Virginia: The taxes on Social Security benefits will be removed gradually by 2026.
These states not only retain Social Security benefits taxes but the details—such as income thresholds and missed exemptions—are different as well. People in these states who have retired must take into account their income and filing status in order to perceive how such taxes will be imposed on them.
Why It Is Important for Retirees to Understand State-Level Taxation
The effect of state-level taxation on Social Security benefits can be substantial. Those people who have retired age and live in states where the tax is being imposed may face a much heavier tax liability than they expected, especially if they do not know the peculiarities of their state’s tax regime.
The point is that in Vermont, single retirees with an AGI exceeding $50,000 or married couples with an AGI in excess of $65,000 will have their Social Security benefits taxed. Still, places like Colorado are more advantageous in that they allow the elderly people (65 and older) to exempt more of their Social Security benefits from the state income tax system.
Because any retiree who lives in one of these states must know and understand the rules in order to cut down their financial burden. In the case of such self-responsible and well-informed retirees, they can easily make the best plan for their finances through knowledge of the tax plan and a step further, they will be able to minimize their state tax liability without much hassle.
It is also very likely that some of this group could even think about moving from their current place to then choose a location where taxes are less onerous. Of course, it is also a factor that one should consider when choosing a place to live after full retirement age.
Though fewer states will be still collecting taxes on Social Security income by 2025, retirees are nevertheless obligated to be aware, on a continuous basis, of the new state regulations related to the taxation of Social Security benefits. Not only do the effects of one state’s taxation on the benefits of retirees differ but they also vary from one state to another.
Being aware and making full use of the law regulations is an effective way of ensuring that all retirees do not end up over-taxed, thus and so ruling out the risk of parting with more money than they actually should do in their tax payment. Retaining the information and financial planning are instrumental for retirees in order to keep their economic status and get the most from the money received from the state as a pension.
