Lead: Beginning in 2026, rules governing state and federal taxation of Social Security benefits will shift for many retirees. West Virginia will stop taxing Social Security income, trimming the number of states that tax benefits to seven. At the federal level, beneficiaries may still have up to 85% of benefits taxed depending on combined income, although new senior-focused deductions are scheduled through 2028. This piece explains which states tax benefits, how much retirees may owe, and what to watch for when filing 2026 returns.
Key takeaways
- As of 2025, eight states tax some Social Security benefits; West Virginia will eliminate its tax in 2026, leaving seven states that tax benefits.
- States that tax Social Security income in 2026 include Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont; many exempt lower-income retirees.
- Federally, up to 85% of Social Security benefits can be taxable; individuals with combined income below $25,000 and couples below $32,000 generally pay no federal tax on benefits.
- President Donald Trump’s One Big Beautiful Bill Act would expand standard-deduction relief for taxpayers 65+ through 2028; taxpayers 65+ could claim an extra $6,000 in 2026 under that proposal.
- With the proposed expansion, single seniors filing 2025 returns could write off up to $23,750 and joint filers over 65 up to $46,700, affecting taxable income calculations.
- Colorado allows a subtraction for federal Social Security income from state taxable income for some seniors, reducing state exposure for eligible filers.
- Approximately 74 million Americans receive monthly Social Security payments, making state-level tax rules relevant for a large population.
Background
Social Security is the largest U.S. safety-net program, providing monthly benefits to roughly 74 million people who rely on those checks for part or all of their living expenses. The federal government sets the baseline rules for how much of benefits may be subject to income tax: depending on combined income measures, beneficiaries can see up to 85% of benefits taxed at the federal level. States retain authority to treat Social Security income differently for state income-tax purposes, creating a patchwork of rules across the country.
Historically, most states have chosen not to tax Social Security benefits, often exempting benefits entirely or providing partial exclusions for older or low-income taxpayers. A minority of states maintain taxes on some or all Social Security income, typically with thresholds or phase-outs tied to other income. Changes in state tax law, like West Virginia’s scheduled elimination of its Social Security tax in 2026, can move retirees across the taxable/untaxed line without any change to their federal benefits.
Main event
State-by-state differences matter because the final tax bill for a beneficiary is the sum of federal and state obligations. In the current tax environment, up to 85% of a person’s Social Security can be included in federal taxable income when combined income — adjusted gross income plus nontaxable interest and half of Social Security benefits — exceeds statutory thresholds. At the state level, eight states taxed Social Security income in 2025; following West Virginia’s policy change in 2026, seven states will continue to tax benefits.
The seven states that will tax Social Security income in 2026 are Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont. Each state uses different formulas and thresholds: some provide full exemptions for lower-income filers while taxing higher earners, and others allow specific subtractions or credits. Colorado does not broadly tax Social Security but does permit certain seniors to subtract federally taxed Social Security from state taxable income, effectively lowering state liability for eligible taxpayers.
At the federal level, eligibility for taxation depends on combined income thresholds: individuals with combined income under $25,000 and joint filers under $32,000 typically avoid federal taxation of benefits. Supplemental Security Income (SSI), which is needs-based, is not subject to federal income tax. Proposed federal changes — notably the One Big Beautiful Bill Act — would raise standard-deduction relief for older filers, changing taxable-income calculations for seniors and reducing federal tax exposure through at least 2028 if enacted.
Analysis & implications
For retirees, the primary takeaway is that state policy can materially affect after-tax income even when federal benefit amounts remain unchanged. A retiree moving between states, or whose state alters its tax code, can face a sudden shift in disposable income. With roughly 74 million beneficiaries, even modest state-level tax burdens can translate into meaningful aggregate effects on household budgets and state revenue streams.
Policy changes such as expanded senior deductions at the federal level interact with state tax systems in complex ways. When the federal taxable income base shrinks because of larger standard deductions for those 65 and older, some state tax systems that tie their calculations to federal adjusted gross income will automatically reflect that change; others will not, depending on state conformity rules. Thus, seniors should examine both federal legislation and how their state conforms to federal definitions of taxable income.
Budgetary considerations are also at play: states that eliminate Social Security taxation may reduce near-term revenue but potentially attract or retain older residents, which can shift long-term spending patterns for health care, housing, and local services. Conversely, states that continue taxing benefits often cite equity and fiscal need, arguing that higher-income retirees should contribute to public finances similar to working taxpayers.
Comparison & data
| State | Taxes Social Security in 2026? | Notes |
|---|---|---|
| Connecticut | Yes | Partial exemptions; income-based phase-outs |
| Minnesota | Yes | Taxed with certain credits/exemptions for low-income retirees |
| Montana | Yes | Allows partial exclusion depending on age and income |
| New Mexico | Yes | Social Security included in taxable income with limited relief |
| Rhode Island | Yes | Partial exclusions and targeted credits exist |
| Utah | Yes | Taxation applies but low-income deductions may reduce liability |
| Vermont | Yes | Phase-outs based on income; lower earners often exempt |
| West Virginia | No (from 2026) | Will eliminate Social Security taxation starting in 2026 |
| Colorado | Not broadly taxed | Allows subtraction of federally taxed Social Security for eligible seniors |
The table above summarizes state positions as reported for 2025 and the scheduled change in West Virginia for 2026. Because states use different definitions and thresholds, two retirees with identical federal benefits can face different state tax outcomes based on residency and additional sources of income.
Reactions & quotes
“Whether Social Security is taxable depends on your combined income and how your state treats that income.”
Social Security Administration (official guidance)
This statement reflects the SSA’s longstanding guidance that federal taxability hinges on combined income measures; states layer their own tax rules on top of that federal baseline.
“West Virginia will no longer include Social Security benefits as taxable income beginning in 2026, reducing state tax exposure for many older residents.”
West Virginia Department of Revenue (official announcement)
The department’s change highlights how state legislative action directly affects retirees’ after-tax income and may influence migration and retirement planning decisions.
Unconfirmed
- The final details and enactment timeline for the One Big Beautiful Bill Act remain subject to legislative action and may change; projected deduction amounts are based on the proposal as reported.
- Exact state-level thresholds and phase-outs can be updated by state legislatures; local rules for eligibility and deduction amounts should be confirmed with state tax authorities each tax year.
- Estimates of how many beneficiaries will see their state tax bills change in 2026 depend on demographic and income distributions that will only be confirmed when taxpayers file 2026 returns.
Bottom line
State taxation of Social Security benefits is uneven and shifting: with West Virginia removing its tax in 2026, seven states will still tax some Social Security income. For many retirees, the combination of federal rules (including potential expanded senior deductions) and state treatment determines actual tax bills. Beneficiaries should review both federal proposals and their state revenue rules before filing and consider consulting a tax professional to account for state-specific thresholds, deductions, and conformity rules.
Practical next steps for beneficiaries include checking state tax agency guidance for 2026, reviewing how proposed federal changes might alter taxable income, and using the latest worksheets from the IRS or a tax advisor to estimate liabilities. Because rules can change, staying informed ahead of the 2026 filing season will help retirees avoid surprises and plan withdrawals or moves with tax consequences in mind.
Sources
- Business Insider — Article on state Social Security taxation (news)
- Social Security Administration — Taxation of Benefits (official guidance)
- Internal Revenue Service — Topic No. 423 Taxation of Social Security Benefits (federal guidance)
- West Virginia Department of Revenue — Tax policy announcements (state official)