Social Security Is Taxed in These 8 States in 2026. The Other 42 Don’t Touch It.

Social Security benefits are earned through years of work and payroll tax contributions, which makes their taxation a sore point for many retirees. After decades of paying into the system, seeing a portion clawed back in retirement is exactly what happens at both the federal and, in some cases, the state level.

The One Big Beautiful Bill Act, signed into law on July 4, 2025, introduced a temporary $6,000 senior deduction for taxpayers age 65 and older. For married couples where both spouses qualify, the deduction doubles to $12,000. It begins to phase out at $75,000 in modified adjusted gross income (MAGI) for single filers and $150,000 for joint filers, and disappears entirely above $175,000 for singles and $250,000 for joint filers. The Council of Economic Advisers estimated that roughly 88% of retirees receiving Social Security will owe no federal tax on their benefits as a result, up from 64% under prior law. That figure has drawn scrutiny: independent analysts at the Urban-Brookings Tax Policy Center found that substantially fewer older adults would actually benefit, with the relief most meaningful for middle-income seniors rather than those at the lowest or highest ends of the income scale.

The deduction does not directly eliminate the federal tax on Social Security. It reduces seniors’ taxable income enough that many fall below the thresholds at which benefits become taxable, but the underlying rules on Social Security taxation remain unchanged. The deduction covers tax years 2025 through 2028 and expires unless Congress acts to extend it.

State taxes on Social Security are a separate matter entirely. While 42 states and the District of Columbia exempt benefits from state income tax, eight states still impose their own levies. Knowing which ones matters when mapping out retirement finances.

The eight states that still tax Social Security in 2026

The list of states taxing Social Security has shrunk considerably in recent years. West Virginia completed a multi-year phase-out of its Social Security tax in 2026, joining the growing majority that leave benefits untouched. Missouri, Kansas, and Nebraska made similar moves in prior years, each repealing their Social Security levy through legislative action.

As of 2026, the following eight states continue to tax Social Security income:

• Colorado
• Connecticut
• Minnesota
• Montana
• New Mexico
• Rhode Island
• Utah
• Vermont

Living in one of these states does not automatically mean you will pay tax on your benefits. Most offer exemptions or credits that shield moderate and lower-income retirees from the full bite. The details vary considerably by state, and understanding them is essential before drawing any conclusions about your own exposure.

Colorado allows taxpayers age 65 and older to deduct all of their federally taxed Social Security benefits from state taxable income, up to applicable AGI limits. The state taxes all income at a flat 4.4% rate, so retirees above the deduction cap face a predictable, if real, bill. Connecticut exempts benefits entirely for single filers with adjusted gross income (AGI) below $75,000 and joint filers below $100,000; higher earners pay state tax on a portion of their benefits at ordinary Connecticut income tax rates.

Minnesota exempts Social Security benefits for single and head-of-household filers with AGI below $86,410 and joint filers with AGI below $110,780, with those thresholds adjusted annually for inflation by the Minnesota Department of Revenue. Residents above those levels face a graduated phase-out of the subtraction, and the state’s top rate of 9.85% applies to single filers with taxable income above $203,150 in 2026, making Minnesota particularly costly for higher-income retirees. Montana offers only a $5,500 subtraction from federal taxable income for taxpayers age 65 and older, with a top income tax rate of 5.65% applying to income above $47,500 for single filers. That relatively modest subtraction means many Montana retirees with meaningful investment income will still owe state tax on a portion of their Social Security.

New Mexico is more generous than its inclusion on the taxing-states list might suggest. Single filers earning up to $100,000 and joint filers earning up to $150,000 pay no state tax on Social Security benefits at all. Utah mirrors federal taxation rules but offsets them with income-based tax credits, though those credits phase out at higher income levels, leaving wealthier retirees with a meaningful state bill. Vermont provides a full exemption for lower-income retirees: single filers with AGI at or below $55,000 owe no state tax on benefits, with a partial exemption phasing out through $65,000; joint filers are fully exempt at or below $70,000, with the phase-out running to $80,000.

Should you relocate to avoid state taxes on Social Security?

If your state imposes taxes on Social Security benefits, relocating before you claim might seem appealing. Before house hunting, take a moment to evaluate the bigger picture.

First, check whether you will actually owe tax. Many of the eight states that tax benefits protect retirees below certain income thresholds. Depending on your AGI and filing status, you may qualify for full or partial relief without leaving your current home.

Second, compare the overall cost of living across states. New Mexico offers high exemption thresholds and a cost of living that sits below the national average. Even where some Social Security income gets taxed, total expenses may still come out lower than in a nominally tax-free state with higher property taxes, housing costs, or everyday prices. Texas has no income tax but carries some of the highest effective property tax rates in the country, a trade-off that matters considerably for homeowning retirees.

Third, consider what you would give up by moving. Social connections, proximity to family, and established support networks become increasingly valuable in retirement. Uprooting yourself later in life can mean rebuilding a social world at precisely the stage when trusted relationships and nearby assistance with medical appointments or home maintenance matter most.

That said, some states on this list are genuinely expensive places to retire. Vermont carries a top marginal income tax rate of 8.75%, among the higher rates in the country, and taxes all forms of retirement income above its exemption thresholds. Minnesota is steeper still: its 9.85% top rate kicks in for single filers with taxable income above $203,150 in 2026, and the Social Security subtraction phases out well before that level. Both states also tend toward higher overall costs of living relative to the Sun Belt alternatives many retirees consider.

If your state combines high income taxes with elevated property taxes and a significant overall cost of living, relocating to a lower-tax state can make financial sense across a long retirement. States with no income tax at all (Florida, Texas, and Tennessee, for example) or those that exempt all retirement income can deliver substantial savings, especially when compounded across two or three decades.

Do your homework before you move

Relocating for tax reasons is rational, but it should be a carefully researched decision rather than an impulsive one based on a single line item.

Focus on the total tax burden. State income taxes, property taxes, sales taxes, and overall living costs all belong in the analysis together. A state that taxes Social Security modestly might still be cheaper overall than one with no income tax but sky-high property assessments.

Evaluate your own income mix carefully. If you have pension income, IRA distributions, or other retirement sources alongside Social Security, examine how each state treats those streams. Some states offer broad retirement income exemptions; others tax all sources equally. A state that exempts Social Security but taxes IRA withdrawals heavily could leave you no better off after a move.

Keep in mind that Social Security taxation at the state level is often aimed at higher earners. If your total income is modest, you may owe little or nothing even in a state that technically taxes benefits. Moving in that scenario could cost far more in disruption and relocation expenses than you would ever recover in tax savings.

Editor’s note: This revision updates the Minnesota Social Security subtraction thresholds to the official 2026 figures published by the Minnesota Department of Revenue ($86,410 for single filers and $110,780 for joint filers), corrects the Minnesota top-rate income threshold to $203,150 for single filers in 2026, and updates Vermont’s exemption phase-out band to reflect current statutory thresholds (full exemption below $55,000 single/$70,000 joint, phasing out by $65,000 single/$80,000 joint).

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