{"id":24979,"date":"2026-01-26T15:31:06","date_gmt":"2026-01-26T15:31:06","guid":{"rendered":"https:\/\/finderica.com\/?p=24979"},"modified":"2026-01-26T15:31:06","modified_gmt":"2026-01-26T15:31:06","slug":"how-state-treatment-of-benefits-may-change","status":"publish","type":"post","link":"https:\/\/finderica.com\/?p=24979","title":{"rendered":"How state treatment of benefits may change"},"content":{"rendered":"
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People affiliated with the 50501 movement march through downtown Detroit, Michigan on Saturday, April 19, 2025<\/p>\n

Dominic Gwinn | Afp | Getty Images<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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There’s a push to end taxes on Social Security benefits to help retirees keep more money in their pockets.<\/p>\n

That includes not only\u00a0federal levies<\/a>\u00a0that may apply to that income, but also state taxes that may\u00a0apply to benefits.`<\/p>\n

“Currently, eight states still tax Social Security to some degree,” John Hishta, senior vice president of campaigns at AARP, said during a Jan. 15 briefing on the 2026 tax filing season. <\/p>\n

Those states are Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah and Vermont.<\/p>\n

“We’re actively working to change that,” Hishta said. <\/p>\n

Eliminating state taxes on Social Security benefits \u2014 combined with the recently enacted temporary federal senior deduction of up to $6,000 per qualifying individual \u2014 would help provide “meaningful, tangible savings that help older Americans cover essentials like groceries, prescriptions and utility bills,” Hishta said.<\/p>\n<\/div>\n

<\/a>Federal vs. state: How Social Security taxes differ<\/h2>\n
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Republican presidential nominee former President Donald Trump arrives to speak at a campaign event at Harrah’s Cherokee Center on August 14, 2024 in Asheville, North Carolina.\u00a0<\/p>\n

Grant Baldwin | Getty Images<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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On the campaign trail, President Donald Trump touted plans to eliminate taxes on Social Security benefits.<\/p>\n

The “big beautiful” tax package that Trump signed into law in July instead implemented a different change \u2014 a senior “bonus” or deduction of up to $6,000 per eligible taxpayer age 65 and over \u2014 that curbs the effects of existing federal levies on benefits. Because the law was passed through reconciliation, or a one-party majority, lawmakers could not eliminate taxes on Social Security benefits.<\/p>\n

The Council of Economic Advisers, an agency within the president’s executive office, estimated in June that 88% of seniors<\/a> may see their total deductions from the One Big Beautiful Bill Act exceed their taxable Social Security benefits. <\/p>\n

However, federal taxes still apply to Social Security benefit income. Those levies are progressive \u2014 higher earners pay taxes on a larger portion of their benefits. Meanwhile, low-income beneficiaries may pay no federal taxes on their Social Security benefits.<\/p>\n<\/div>\n

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Read more CNBC personal finance coverage<\/h2>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n
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Social Security beneficiaries may also have to pay state taxes on their benefits, depending on where they live. <\/p>\n

Most states do not tax Social Security benefits, according to Carl Davis, research director at the Institute on Taxation and Economic Policy, a non-profit, nonpartisan tax policy organization.<\/p>\n

In states that currently do tax benefits, those levies typically apply at higher income thresholds. Consequently, proposals to eliminate state taxes on Social Security benefits, unlike the new federal senior deduction, target higher-income retirees.<\/p>\n

“Low-income retirees already are exempt from state tax on Social Security,” Davis said. “The question is whether higher-income retirees should get a special break as well.”<\/p>\n<\/div>\n

<\/a>Momentum toward tax breaks for older Americans<\/h2>\n
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In 2024, Kansas, Missouri and Nebraska all ended state taxes on Social Security, according to AARP. As of Jan. 1, West Virginia now has a 100% tax deduction<\/a> on Social Security benefits.<\/p>\n

Some other states that still tax Social Security income, such as Rhode Island and Minnesota, have proposals to end those taxes. <\/p>\n

“Because a large chunk of Social Security income is already exempt from state tax in these states, enacting an additional exemption is really geared towards retirees at the higher end of the income scale,” Davis said.<\/p>\n

If Rhode Island moved to a full tax exemption on Social Security benefits, ITEP estimates<\/a> that 75% of the savings would go to the top 20% of households by income in that state.<\/p>\n<\/div>\n

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In Minnesota, about 58% of the Social Security tax cuts would go to the highest income residents, according to ITEP<\/a>. Meanwhile, modest-income households would receive smaller tax cuts or may not benefit from the change at all, according to the research organization.<\/p>\n

“The momentum has been toward these special carve-outs for older adults,” Davis said. “That has shifted more of the responsibility for funding government on the young people and young families.”<\/p>\n

While tax changes favoring seniors are often aimed at encouraging residents to live in certain states, research<\/a> from the University of New Hampshire and others has found that those tax breaks do not necessarily influence those decisions.<\/p>\n

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How states tax Social Security retirement benefits<\/h2>\n

Colorado<\/strong><\/a>: <\/strong>Benefits taxed for individuals ages 55 to 64 with adjusted gross income over $75,000 for individuals and $95,000 for married couples filing jointly.<\/p>\n

Connecticut<\/strong><\/a>: <\/strong>Benefits taxed for individuals with adjusted gross income starting at $75,000 for single tax filers and $100,000 for married couples filing jointly. <\/p>\n

Minnesota<\/strong><\/a>: <\/strong>Benefits taxed for adjusted gross income over $84,490 for single taxpayers, $108,320 for married couples filing jointly <\/p>\n

Montana<\/strong><\/a>: <\/strong>Benefits taxed for single taxpayers with more than $25,000 in adjusted gross \u00a0income and for married couples filing jointly with more than $32,000.<\/p>\n

New Mexico<\/strong><\/a>: <\/strong>Benefits taxed for single tax filers with $100,000 or more in adjusted gross income, and for married couples filing jointly with $150,000 or more.<\/p>\n

Rhode Island<\/strong><\/a>: <\/strong>Benefits taxed if under full retirement age (66 to 67, depending on birth year), or for those with adjusted gross income starting at $107,000 for single tax filers and $133,750 for married couples filing jointly. <\/p>\n

Utah<\/strong><\/a>: <\/strong>Benefits taxed for overall income over $54,000 for single tax filers and $90,000 for married couples filing jointly. <\/p>\n

Vermont<\/strong><\/a>: <\/strong>Benefits taxed for individuals with adjusted gross income over $50,000 and married couples filing jointly with more than $65,000.<\/p>\n

Source: <\/em>AARP Research<\/em><\/a><\/p>\n<\/div>\n<\/div>\n<\/div>\n

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People affiliated with the 50501 movement march through downtown Detroit, Michigan on Saturday, April 19, 2025 Dominic Gwinn | Afp | Getty Images There’s a push to end taxes on Social Security benefits to help retirees keep more money in their pockets. That includes not only\u00a0federal levies\u00a0that may apply to that income, but also state<\/p>\n","protected":false},"author":1,"featured_media":24980,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"rank_math_lock_modified_date":false,"footnotes":""},"categories":[196],"tags":[98,316,290,2744],"class_list":{"0":"post-24979","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-finance-news","8":"tag-benefits","9":"tag-change","10":"tag-state","11":"tag-treatment"},"_links":{"self":[{"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/posts\/24979","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=24979"}],"version-history":[{"count":0,"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/posts\/24979\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/media\/24980"}],"wp:attachment":[{"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=24979"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=24979"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=24979"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}