Nobody wants to pay taxes, especially when they are young or retired and receiving Social Security benefits. They do, however, support the government and many of the services that we rely on every day.
One of the most costly financial mistakes you can make is to plan your expenses without considering how much you’ll have to pay in taxes. The second-worst case scenario is failing to develop a tax plan tailored to your specific state.
The states have recently announced that they will tax Social Security benefits more in 2025; therefore, if you are not used to researching how taxes affect your Social Security benefits, please continue reading.
Do federal taxes impact your Social Security?
Yes, this is the first factor to consider when determining how much money will stay with you. In this scenario, the federal government may seize a portion of your Social Security benefits, along with any other income you have.
The combined income includes your adjusted gross income (AGI), nontaxable interest, and half of the value of your Social Security benefits. Using that figure, you’ll know how much you have to pay.
- If you file as a single individual, you can receive up to 50% of your Social Security benefits if your combined income falls between $25,000 and $34,000 or up to 85% if it exceeds $34,000.
- Couples with income between $32,000 and $44,000 can claim up to a 50% deduction. When it exceeds $44,000, the percentage will rise to 85%.
Do state taxes impact your Social Security?
It depends. As you are aware, traffic, firearms, and business laws vary by state. As with tax regulations, the amount of Social Security you must pay to your state government varies. That is why it is critical to understand the laws in the state where you live and plan to retire.
Part of your retirement strategy should include analyzing your options and determining where your retirement funds will stay the longest. Currently, 41 states and the District of Columbia do not tax your Social Security checks beyond what the federal government collects. They are:
- Alabama.
- Alaska.
- Arizona.
- Arkansas.
- California.
- Delaware.
- Florida.
- Georgia.
- Hawaii.
- Idaho.
- Illinois.
- Indiana.
- Iowa.
- Kentucky.
- Louisiana.
- Maine.
- Maryland.
- Massachusetts.
- Michigan.
- Mississippi.
- Missouri.
- Nevada.
- New Hampshire.
- New Jersey.
- New York.
- North Carolina.
- North Dakota.
- Ohio.
- Oklahoma.
- Oregon.
- Pennsylvania.
- South Carolina.
- South Dakota.
- Tennessee.
- Texas.
- Virginia.
- Washington.
- Washington, D.C.
- Wisconsin.
- Wyoming.
However, you should carefully review the state’s legislation because the exemptions may be tied to income thresholds. In Missouri, your Social Security benefits are exempt if your AGI is less than $85,000 for a single filer or $100,000 for a joint filer.
What if your state isn’t on the previous list? Then you pay more taxes on your Social Security benefits. There are nine states in this category. However, there are a few exceptions that you can benefit from:
| State | Single Filler | Joint Filler |
| Colorado | Based on age, persons aged 55-64 can exclude up to $20,000 of retirement income, while those aged 65 and older can subtract up to $24,000. | |
| Connecticut | AGI < = $75,000 | AGI < = $100,000 |
| Kansas | AGI < = $75,000 | |
| Minnessota | AGI < = $82,190 | AGI < = $105,380 |
| Montana | AGI < = $25,000 | AGI < = $32,000 |
| New Mexico | AGI < = $75,000 | AGI < = $100,000 |
| Rhode Island | AGI < = $88,950 | AGI < = $111,200 |
| Utah (in the form of a tax credit) | Income < = $30,000 | Income < = $50,000 |
| Vermont | AGI < = $50,000 | AGI < = $65,000 |
In addition, West Virginia is moving away from taxing Social Security benefits. They are implementing an incremental technique to reduce Social Security taxes based on your AGI. In 2026, the full exemption will be extended to all residents, regardless of income.