While most Americans look forward to receiving their Social Security benefits tax-free, some retirees may face a surprise tax bill in 2025. That’s because nine U.S. states will continue taxing Social Security income, even as others have moved to phase out such levies.
If you’re a retiree or nearing retirement in one of these nine states, it’s crucial to understand your potential tax burden and take action now to protect your income. Here’s what you need to know — and three steps to help minimize the impact.
Which States Will Tax Social Security in 2025?
As of 2025, the following nine states tax Social Security benefits at the state level:
- Colorado
- Connecticut
- Minnesota
- Montana
- New Mexico
- Rhode Island
- Utah
- Vermont
- West Virginia
While some states tax all or part of Social Security benefits based on your income, others offer exemptions or deductions for lower- to moderate-income retirees.
For example:
- Connecticut exempts benefits for single filers with adjusted gross incomes (AGI) under $75,000, and joint filers under $100,000.
- New Mexico offers partial or full exemptions for low-income individuals.
- Colorado allows retirees aged 65 and older to exclude up to $24,000 of retirement income, including Social Security.
For a full breakdown of state-specific taxation rules, visit the Tax Foundation’s state retirement tax guide.
Why These States Still Tax Benefits?
While the federal government may tax Social Security benefits if your combined income exceeds a certain threshold, many states opt not to. As of 2025, 41 states do not tax Social Security at all, either due to general tax policy or specific exemptions aimed at protecting retirees.
However, the remaining nine states continue to impose taxes to help balance budgets or fund essential services. Despite growing pressure, especially in places like Utah and Minnesota, where lawmakers have proposed repealing these taxes, changes haven’t been fully implemented yet.
What You Should Do If You Live in a Taxing State?
If you’re living in one of these nine states and receive Social Security — or will soon — here are three proactive steps you should consider to minimize the impact on your income:
1. Understand Your State’s Tax Rules
Each of the nine states has different rules regarding how Social Security benefits are taxed.
- Some, like Connecticut and Rhode Island, base taxes on income thresholds.
- Others, like Vermont and West Virginia, have phaseouts depending on your filing status and income level.
Start by checking your state’s Department of Revenue website for specifics. Here are a few quick links:
- Connecticut Department of Revenue Services
- Minnesota Department of Revenue
- Utah State Tax Commission
Knowing your state’s policies can help you determine whether you’ll owe taxes — and whether you qualify for any exemptions.
2. Consider a Roth Conversion
Traditional retirement accounts like IRAs and 401(k)s require you to take taxable withdrawals in retirement. These withdrawals can increase your combined income, potentially subjecting your Social Security benefits to both federal and state taxation.
By converting a portion of your traditional IRA or 401(k) into a Roth IRA, you pay taxes on the conversion amount now — but future qualified withdrawals will be tax-free.
This strategy may lower your taxable income in retirement and reduce how much of your Social Security gets taxed. However, Roth conversions can be complex, so it’s best to consult with a financial advisor or tax planner before proceeding. You can also learn more from the IRS’s guide on Roth IRAs.
3. Strategize Your Retirement Withdrawals
Not all income is treated equally when it comes to Social Security taxation. By being strategic about when and how you withdraw retirement income, you can potentially reduce your tax burden.
For example:
- Delay Social Security until full retirement age (or even age 70) to maximize your benefit.
- Use taxable brokerage accounts (capital gains may be taxed at lower rates) before dipping into tax-deferred accounts.
- Use Roth IRAs in higher-income years to avoid bumping up your tax bracket.
Planning ahead allows you to stay under your state’s income threshold, potentially qualifying for an exemption or reduced tax rate.
The Bottom Line
Most retirees don’t anticipate paying taxes on their Social Security benefits. But if you live in Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, or West Virginia, you may face additional state-level taxation in 2025.
Fortunately, you can take steps now — like understanding your local tax laws, exploring Roth conversions, and optimizing your withdrawal strategies — to reduce your tax exposure.
Being proactive can help preserve your hard-earned retirement income and offer more financial flexibility in your golden years.
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