Exciting news for retirees: according to a recent assessment, 41 states across the United States have decided not to tax Social Security benefits by 2025. Notably, both Missouri and Kansas have made the decision to eliminate these taxes starting in 2024. This change leaves only nine states continuing to tax benefits in 2025.
Are you curious about the implications of these changes? Be sure to check out our article on the Social Security Cost-of-Living Adjustment (COLA) increase announced for 2025. Here are five crucial things retirees should be aware of regarding this update.
Social Security taxes reduced in most states by 2025
If Social Security is a significant part of your income, consider making these four strategic money moves now that Donald Trump has been elected. These steps could help you better navigate the changing financial landscape.
Wondering whether your state—or your ideal retirement destination—plans to tax your Social Security benefits? Explore this topic further to make informed decisions about your future. Discover three key truths about the future of Social Security that every recipient should understand. Staying informed can empower you to make the best choices for your retirement.
These are the new states that will not impose taxes on your Social Security benefits as of 2025:
- Connecticut: Social Security benefits are not taxed for single filers with an Adjusted Gross Income (AGI) below $75,000 or couples filing jointly with an AGI under $100,000.
- Minnesota: Offers exemptions for married filers with an AGI below $105,380 and individuals with an AGI under $82,190.
- Montana: Benefits are fully exempt for single filers with an AGI under $25,000 and joint filers with an AGI below $32,000.
- New Mexico: Exempts benefits from taxes for individuals earning less than $100,000 annually and couples making under $150,000.
- Rhode Island: Benefits are not taxed for individuals with an AGI under $88,950 and couples with an AGI below $111,200.
- Utah: Exempts benefits for single filers earning less than $30,000 per year and couples with incomes below $50,000.
- Vermont: Benefits are tax-free for couples earning less than $65,000 annually and individuals with incomes under $50,000.
- West Virginia: Currently, exempts individuals with incomes below $50,000 and couples earning less than $100,000. The state is phasing out Social Security taxes entirely: a 35% reduction in 2024, 65% in 2025, and full elimination by 2026
Explore More: Potential Changes to Social Security with a Republican Congress
As the political landscape shifts, retirees may wonder about the future of their Social Security benefits. One significant proposal from Trump is the elimination of Social Security taxes. Here are three strategic moves retirees should consider this winter.
In some states, there are beneficial tax exemption policies for Social Security. For example, Connecticut offers a similar exemption policy to Colorado. Single tax filers or married individuals filing separately with an Adjusted Gross Income (AGI) below $75,000 will not see their benefits taxed. The same tax relief applies to married couples filing jointly if their AGI is less than $100,000.
Similarly, Minnesota provides exemptions for certain income levels. If you’re a married filer with an AGI under $105,380 or an individual with an AGI below $82,190, you won’t pay taxes on your Social Security benefits.
In general, all Social Security benefits are tax deductible for single filers with an AGI of less than $25,000 and for joint filers with an AGI below $32,000. This deduction can significantly ease the financial burden for many retirees.