The Social Security program has been providing millions of vulnerable Americans with a stable monthly income for close to a century now. According to a recent poll conducted by Gallup, “six in ten retirees said their benefits are a major source of income.”
Over the years since its inception, the Social Security program has undergone various changes to help better sustain the program in the long run. For instance, the 1983 Amendments resulted in the implementation of a gradual increase to the Full Retirement Age due to increased life expectancy rates.
More recently, under the recently elected Trump Administration, a new bill called the One, Big, Beautiful Bill Act had been passed by the House. Amongst the tax related proposals in this legislation, seniors on Social Security might receive an additional $4,000 ($6,000 if Congress’ proposal passes) tax deduction to their existing tax deduction.
Furthermore, regarding the relation between tax and Social Security, there still remains nine states wherein Social Security benefits are taxed. Here is what you need to know.
Social Security tax
A primary source of revenue for the Social Security program is payroll tax. According to the SSA, “Social Security is financed through a dedicated payroll tax. Employers and employees each pay 6.2 percent of wages up to the taxable maximum of $176,100 (in 2025), while the self-employed pay 12.4 percent.”
Social Security is a federal social insurance program: you pay Social Security payroll tax while you are employed, and upon retirement, disability, or death, you or your dependents can claim benefits. However, taxation on your benefits does not necessarily end once you start receiving payments.
At the federal level, beneficiaries might pay taxes on their Social Security benefits depending on their total income. If your combined annual income (adjusted gross income plus nontaxable interest and half of your Social Security benefits) is between $25,000 and $34,000 (for single filers) or between $32,000 and $44,000 (for joint filers), you might pay taxes on up to 50% of your benefits. If your combined income exceeds $34,000 (single) or $44,000 (joint filers), up to 85% of your benefits could be taxable.
State taxes
While federal rules apply to everyone, taxation of Social Security benefits differs from state to state. In recent years, states like Kansas, Missouri, and Nebraska have stopped taxing Social Security benefits.
However, in the following nine states, retirees whose incomes exceed certain thresholds could owe state income taxes on their Social Security benefits:
- Colorado: Taxpayers aged 65 or older with an adjusted gross income (AGI) below $75,000 (individuals) or $95,000 (joint filers) pay no state taxes on their Social Security benefits. Taxpayers under age 65 or with higher AGIs can deduct a maximum of $20,000 of their federally taxable Social Security benefits on their state tax return. Any amount exceeding this is subject to a 4.4% state tax.
- Connecticut: Individuals with an AGI below $75,000 and joint filers below $100,000 are exempt from state taxes on Social Security. Those with higher AGIs can have up to 25% of their benefits taxed, with rates ranging from 4.5% to 6.99%.
- Minnesota: Individuals with AGIs below $84,490 and joint filers below $108,320 do not owe state taxes on their Social Security benefits. Every additional $4,000 of AGI above those thresholds increases the taxable amount by 10% of the federally taxable benefits. Rates range from 6.8% to 9.85%.
- Montana: All federally taxable Social Security income is also taxable at the state level. Taxpayers over 65 receive an additional state deduction of $5,660. State tax rates range from 4.7% to 5.9%.
- New Mexico: Individuals with AGIs under $100,000 and joint filers below $150,000 are exempt from state taxes on Social Security. Higher-income taxpayers pay state taxes on all federally taxable Social Security benefits at rates from 4.9% to 5.9%.
- Rhode Island: Individuals with AGIs below $104,200 and joint filers below $130,250 are exempt from state taxation on Social Security. Those above these limits pay state taxes on federally taxable benefits at rates ranging from 4.75% to 5.99%.
- Utah: Individuals with AGIs below $45,000 and joint filers below $75,000 qualify for a full state tax credit offsetting taxes on Social Security income included in federal taxes. Those above these thresholds might qualify for a partial credit. The state tax rate is 4.55%.
- Vermont: Individuals with AGIs below $50,000 and joint filers below $65,000 pay no state taxes on Social Security. Those within $10,000 above these thresholds receive a partial deduction. Above $60,000 (individual) and $75,000 (joint filers), federally taxable benefits are fully subject to state taxation at rates from 3.35% to 8.75%.
- West Virginia: Individuals with AGIs below $50,000 and joint filers below $100,000 are exempt from state taxes on Social Security. Above these limits, taxpayers owe state taxes on 35% of their federally taxable benefits, at rates ranging from 4.44% to 4.82%. However, as of 2026, West Virginia will stop taxing Social Security income entirely.