Seniors in These 8 States Could Face a Costly Expense in Retirement
Key Points
Eight states still tax some of their seniors' Social Security benefits.
Some West Virginia residents could still owe these taxes on their 2025 returns.
Federal Social Security benefits taxes apply to residents of all states and are becoming increasingly common.
- The $23,760 Social Security bonus most retirees completely overlook ›
You're never as aware of how much things cost as you are when you're living on a fixed income. You do what you can to keep expenses down on everyday items, like shopping around and buying things on sale. But other costs are harder to control.
Many retirees encounter this problem when they have to give a portion of their Social Security benefits back to Uncle Sam every year. This can cost thousands of dollars per year. For residents in the eight states listed below, there's another costly tax they could encounter in retirement.
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These 8 states still tax Social Security benefits
In addition to federal benefit taxes, residents in the following eight states could also owe state Social Security benefit taxes:
- Colorado
- Connecticut
- Minnesota
- Montana
- New Mexico
- Rhode Island
- Utah
- Vermont
West Virginian seniors with adjusted gross incomes (AGIs) greater than $50,000 for single adults or $100,000 for married couples could also owe state taxes on a portion of their Social Security benefits when they file their 2025 returns. However, West Virginia has eliminated its benefit tax for 2026 and beyond.
Just because your state appears on the list above doesn't mean you're guaranteed to owe state benefit taxes. Most of these states have exemptions for low- to middle-income seniors. If you're not sure whether a state benefit tax will affect you, consult with an accountant for personalized advice.
Federal benefit taxes will be a bigger problem
The federal government taxes the Social Security benefits of seniors in all states, and these taxes are much harder to avoid. If you have a provisional income of $25,000 or more for a single adult or $32,000 or more for a married couple, the IRS will take a chunk of your benefits. These thresholds aren't indexed for inflation, either, so you could face them in future years, even if you don't owe them now.
This doesn't mean you'll wind up with a tax bill when you file your return, though. It may just lead to a smaller refund check than you were expecting. An accountant can help you estimate how much this will affect your tax liability, so you can plan for future years.
You can also request that the Social Security Administration withhold money from your benefits for taxes. You can choose from 7%, 10%, 12%, or 22% withholding. If it keeps back too much, the extra will come back to you with your next tax refund.
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