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Key Takeaways
- Up to 85% of your Social Security benefits are taxed by the federal government if you meet certain income thresholds.
- Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia are the only states that tax Social Security.
- Have a strategy in place that works with Social Security, including maximizing your benefits, carefully determining your portfolio allocation, and having other income sources.
There tends to be a lot of confusion about how Social Security benefits are taxed. Benefits are taxed by the federal government but most states don’t tax Social Security. In fact, only nine states impose income taxes on these benefits.
If you’re going to receive or already receive benefits, it’s a good idea to understand what the tax treatment of your benefits is, as it varies based on where you live, your income, and tax filing status.
Federal Rules for Taxing Social Security Benefits
You may not realize it, but the federal government does tax your Social Security benefits.
“I think most people are not even just surprised, but perhaps shocked that their benefits could be federally taxed,” said Clark Randall, director of financial planning at Creekmur Wealth Advisors in Dallas, Texas.“If you think about it, the only reason you have a Social Security benefit is because you paid taxes into the system and you get benefits back.”
Randall says understanding how Social Security is taxed can help you plan better for the future and decide when to start receiving benefits.
Your combined income determines whether your Social Security benefits are taxed at the federal level. Combined income is defined as your adjusted gross income (AGI) plus any nontaxable interest income and half of your Social Security benefits.
The Internal Revenue Service (IRS) has income thresholds for individuals who must pay taxes on their Social Security income based on their tax filing status. These limits are noted in the table below:
| If your tax filing status is … | Your combined income is … | Your benefits are taxed at … |
|---|---|---|
| Single, married filing separately (living apart from spouse during the year), head of household, or surviving spouse | $25,000 or less | 0% |
| $25,001 to $34,000 | Up to 50% | |
| $34,001 and over | Up to 85% | |
| Married filing jointly | $32,000 or less | 0% |
| $32,001 to $44,000 | Up to 50% | |
| $44,001 and over | Up to 85% |
If you are married filing separately and lived with your spouse during the year, up to 85% of your benefits are taxable.
One thing to remember is that you can only be taxed on up to 85% of your benefits, not 100%.
States That Tax Social Security Benefits: Full List & Rules
The rules about Social Security taxation vary by state. Just like federal taxation, knowing where you stand can help you better plan for your financial future. Some states tax Social Security, while others do not. Some states don’t tax any retirement income whatsoever, while other states have no state income tax at all.
There are nine states that tax Social Security benefits. In many of these states, whether or not your benefits are taxed is based on your adjusted gross (AGI).
| State | Tax Filing Status | Adjusted Gross Income (AGI) | Tax Treatment | Age Bracket (If Applicable) |
|---|---|---|---|---|
| Colorado | N/A | N/A | Federally taxable benefits are fully deductible | 65 and older |
| Single | $75,000 or less | Federally taxable benefits are fully deductible | 55 to 64 | |
| Over $75,000 | $20,000 deduction | 55 to 64 | ||
| Married filing jointly | $95,000 or less | Federally taxable Social Security benefits are fully deductible | 55 to 64 | |
| Over $95,000 | $20,000 deduction | 55 to 64 | ||
| Connecticut | Single, married filing separately | Up to $75,000 | 100% fully exempt | |
| Over $75,000 | Partial exemption of up to 25% above AGI threshold | |||
| Married filing jointly, head of household | Up to $100,000 | 100% fully exempt | ||
| Over $100,000 | Partial exemption of up to 25% above AGI threshold | |||
| Minnesota | Single, head of household | $82,190 or less | Fully exempt | |
| Over $82,190 | Partial exemption | |||
| Married filing jointly | $105,380 or less | Fully exempt | ||
| Over $105,380 | Partial exemption | |||
| Montana | Single | Under $25,000 | Fully exempt | |
| $25,000 to $34,000 | 50% of benefits taxable | |||
| Over $34,000 | 85% of benefits taxable | |||
| Married filing jointly | Under $32,000 | Fully exempt | ||
| $32,000 to $44,000 | 50% of benefits taxable | |||
| Over $44,000 | 85% of benefits taxable | |||
| New Mexico | Single | Under $100,000 | Fully exempt | |
| Married filing separately | Under $75,000 | Fully exempt | ||
| Married filing jointly, head of household, surviving spouse | Under $150,000 | Fully exempt | ||
| Rhode Island | Single, head of household | Under $104,200 | Fully exempt | Full retirement age |
| Married filing separately | Under $104,225 | Fully exempt | Full retirement age | |
| Married filing jointly, surviving spouse | Under $130,250 | Fully exempt | Full retirement age | |
| Utah | Single | Up to $54,000 | Nonrefundable tax credit | |
| Married filing separately | Up to $45,000 | Nonrefundable tax credit | ||
| Married filing jointly, head of household | Up to $90,000 | Nonrefundable tax credit | ||
| Vermont | Single, married filing separately, head of household, surviving spouse | Up to $50,000 | Fully exempt | |
| $50,001 to $59,999 | Fully exempt | |||
| Married filing jointly | Up to $65,000 | Partial exemption | ||
| $65,001 to $74,999 | Partial exemption | |||
| West Virginia | Single | Up to $50,000 | Fully exempt | |
| Over $50,000 | 65% of benefits taxable | |||
| Married filing jointly | Up to $100,000 | Fully exempt | ||
| Over $100,000 | 65% of benefits taxable |
Important
West Virginia will be phasing out its state income tax on Social Security as of the 2026 tax year.
The remaining 41 states and Washington, D.C., won’t tax Social Security benefits as of 2025, which can be a boon for retirees residing in these states.
“Because Social Security is a core piece of most people’s retirement income picture, being able to collect it tax-free at the state level keeps more money in their pocket,” said Brian Ellenbecker, partner and financial advisor at Shakespeare Wealth Management in Pewaukee, Wisconsin. Although the state has an income tax, it exempts Social Security unconditionally.
“Being able to exclude Social Security from a retiree’s Wisconsin income increases their retirement planning flexibility by not having to worry about changing the taxation of that benefit, even if they choose to realize additional taxable income,” said Ellenbecker.
Eight states don’t have an individual income tax at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, and Wyoming. This means none of your income is ever taxed, including any of your Social Security or retirement income, which Randall says makes financial and tax planning much easier.
“We (people in Texas or other non-income tax states) don’t have to think about that additional layer of taxation that has its own deductions, credits, and exemptions,” Randall said.
Smart Strategies for Your Retirement Income
It’s important to develop a comprehensive retirement plan so your Social Security benefits work along with your other retirement income. Consider the following strategies to help you along the way:
- Maximize your Social Security benefits: The amount of your benefit is determined by when you take it. You’ll get the most if you wait until your full retirement age (FRA). This date is determined by your birth year. Your FRA is 66 if you were born in 1943 to 1954, 66 to 67 if you were born in 1955 to 1959, and 67 if you were born in 1960 and later. Your benefit is highest if you wait to collect until age 70.
- Fine-tune your portfolio: Make sure your holdings are well-diversified with assets that can generate income for you during retirement. Depending on your risk tolerance and age, you may want to look at dividend-paying stocks and fixed-income securities.
- Make sure you have income sources beyond Social Security: Social Security will only take you so far. Your retirement plan should also include other retirement accounts, such as an employer-sponsored plan (401(k)s or 403(b)s), individual retirement accounts (IRAs), health savings accounts (HSAs), and annuities.
Randall and Ellenbecker suggest working with a financial professional to develop a strategic tax plan, especially when it comes to aligning your Social Security payments with your other retirement income.
The Bottom Line
Social Security is taxable at the federal level and may or may not be taxed in your state. Knowing how your benefits are taxed can help you budget and manage your cash flow, especially if your benefits are your only source of income.
If you’re finding it challenging to navigate through the nuances of budgeting and taxation, speaking with a financial expert can help you with financial and tax planning strategies.
