Social Security Tax Treatment Varies Widely: Here's How Many States Tax Your Benefits in 2025

Social Security serves as a critical income source for millions of American retirees. According to AARP data, approximately 40% of seniors aged 65 and older depend on Social Security for at least 50% of their retirement income. However, the tax implications of these benefits differ dramatically based on where you choose to retire.

The Surprising Tax Reality: Only a Handful of States Tax Social Security

When examining how many states tax Social Security in 2025, the answer might surprise you. While federal taxation can affect up to 85% of benefits depending on income levels, state-level taxation presents a more limited concern. Just nine states currently maintain income taxes on Social Security payments — a significant decline from previous years.

According to Brian Kuhn, CFP and financial advisor at Wealth Enhancement Group, “The states choosing not to tax Social Security far outnumber those that do. Recent legislative changes in Missouri, Nebraska, and Kansas have further shortened the list of states implementing these taxes.”

Which States Still Tax Social Security Benefits?

The nine states that will continue taxing Social Security in 2025 are:

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

It’s worth noting that West Virginia is phasing out this tax entirely, with benefits becoming fully exempt starting in 2026.

The Majority: 41 States Without Social Security Taxes

Forty-one states plus Washington, D.C. will not tax Social Security benefits in 2025. This substantial list includes:

Alabama, Alaska, Arizona, Arkansas, California, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Nebraska, Nevada, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Virginia, Washington, Wisconsin, Wyoming, and Washington, D.C.

Understanding Your Tax Savings

For retirees living in no-tax states, the financial benefits accumulate substantially. You can estimate your personal savings by calculating your state’s effective tax rate on all income sources and applying it to your total Social Security benefits received.

For example: If your state’s effective tax rate is 5% and you receive $30,000 annually in Social Security, you save approximately $1,500 each year in state taxes.

The collective impact is remarkable. In Missouri alone, retirees collectively save around $309 million annually by not paying state income tax on Social Security. Nebraska residents benefit from roughly $17 million in annual savings through similar non-taxation policies.

State-Specific Considerations and Nuances

Kuhn emphasizes that tax treatment varies significantly, even among states that technically tax Social Security. “Each state has unique provisions,” he explains. “Age thresholds and income limits create different scenarios for different taxpayers.”

Colorado illustrates this complexity. Residents aged 65 and older have been able to fully deduct federally-taxed Social Security benefits since 2022. Beginning in 2025, this exemption expands to include those aged 55-64 with adjusted gross income not exceeding $75,000 (individuals) or $95,000 (married couples filing jointly).

Understanding your specific state’s regulations — rather than relying on general rules — remains essential for tax planning purposes.

The Bottom Line

As tax policy continues evolving, knowing how many states tax Social Security becomes increasingly important for retirement planning. With 41 states offering tax exemptions on Social Security benefits, the majority of American retirees benefit from more favorable tax treatment based on residency. However, individual circumstances within each state require careful examination to fully understand potential tax obligations.