Seniors in These States May Be Hit With This Unwanted Retirement Bill

After paying into Social Security for decades, it's normal to expect those monthly checks to be yours to keep. Depending on where you live, a portion of these benefits could belong to the state in the form of taxes.

The good news is that only eight states still tax Social Security in 2026. And that's not all. The better news is that many retirees in those states qualify for income-based exemptions, deductions, and tax credits that shield them from the full burden of this tax.

If you live in one of these states or your retirement plan includes relocating, read on to understand how these rules may impact you rather than end up with an unexpected retirement bill.

Colorado

While Colorado is one of the few states still taxing Social Security, many retirees aren't affected. That's because the state allows residents aged 65 and older to deduct all federally taxable Social Security benefits from their Colorado taxable income.

If you're aged between 55 and 64, you may also qualify for a full deduction if your adjusted gross income is below $75,000 for one person or $95,000 for married couples. Otherwise, the state doesn't tax a total of $20,000 in benefits.

Connecticut

Most middle-income retirees don't have their Social Security benefits taxed in Connecticut. Incomes under $75,000 for single filers and $100,000 for married couples are exempt.

Above these thresholds, Connecticut still limits taxation to 25% of total benefits, rather than the entire amount of your check. Sure, it's not ideal, but it's also a lot less than what it may look like at first glance.

Minnesota

Minnesota's tax structure is a little more confusing. The state taxes the same Social Security benefits as the federal government, but it also offers a subtraction that may reduce or eliminate your tax burden.

For 2026, benefits are mainly taxable for high-income residents. A single filer is exempt from state taxation if their income is $86,410 or below, while a couple is exempt if their income is $110,780 or below.

Retirees with modest incomes often pay little or no state tax on their benefits. Federally taxable benefits are subject to a partial exclusion as income rises above the aforementioned thresholds until it phases out completely and all benefits are taxed. So, planning to relocate to Minnesota as a high-income retiree is probably not the best move.

Montana

Montana remains one of the least generous states when it comes to Social Security taxation. It generally follows federal rules by including federally taxable income in its state taxable income.

While residents 65 or older may qualify for a $5,660 exemption from federal taxable income, higher-income retirees are most likely to get the short end of the stick in Montana.

New Mexico

New Mexico has what could be called a misleading reputation as a Social Security tax state. While it taxes benefits, it also has some of the highest exclusion thresholds in the nation. Many retirees never pay tax on their benefits, despite the state's inclusion on this list.

How could this be? Single residents with incomes up to $100,000 and couples filing jointly with incomes up to $150,000 are excluded from state taxation.

Rhode Island

If you have your eye on Rhode Island for retirement, you may receive one of the most generous exemptions as long as you meet the age and income requirements.

Have you reached full retirement age? If so, you can avoid state taxes on your Social Security as long as your income is below $107,000 as a single filer or $133,750 as a couple or qualifying widower. Above those limits, benefits become taxable.

Utah

Retiring in Utah means you're technically expected to pay Social Security benefit tax, but the state offsets much of your tax through a state credit.

However, if your adjusted gross income is more than $54,000 (as a single filer) or $90,000 (as a couple filing jointly), the credit phases out. As a result, middle-income retirees often see most or all of their potential Social Security tax erased by the credit.

Vermont

In Vermont, many seniors have full exemptions that gradually phase out as income rises. With lower or moderate incomes, you can generally avoid taxes on Social Security benefits entirely.

As a single filer, benefits aren't taxed if your income is $55,000 or below and only partially taxed if it's below $65,000. For couples, the numbers rise to $70,000 (not taxed) and $80,000 (partially taxed). In addition, the state has historically raised income thresholds, making the tax less burdensome for many retirees.

Bottom line

When retirees research relocating, Social Security taxes often come up. However, you shouldn't look at them in isolation. A state that taxes senior benefits may still be more affordable overall, especially if it offers low housing costs, property taxes, or health care expenses.

That may not mean much to you if you rely heavily on Social Security income, and that's understandable. The key to paving the way for a comfortable, stress-free retirement is researching these state-specific rules to avoid an unexpected tax bill and make it easier to compare the true cost of retirement across state lines.