West Virginia Just Changed Its Social Security Tax Rules - Is Your State Next?

If you collect Social Security and you live in West Virginia, January 1, 2026 was a meaningful milestone: the Mountain State officially stopped taxing your senior benefits.

The change caps a three-year phaseout that began in 2024, when West Virginia allowed retirees to deduct 35% of their Social Security income from state taxes. That deduction jumped to 65% in 2025, then hit 100% in 2026 — meaning the tax is fully gone. You won't feel the full effect until you file your 2026 return in 2027, but for West Virginia's retirees, the math is simple: a benefit that was taxed at the state level no longer is, regardless of income.

West Virginia's decision didn't happen in isolation. It's part of a broader and accelerating trend: states steadily eliminating a tax that many retirees — and legislators — view as double taxation, since Social Security benefits are already partially taxed at the federal level.

Where the map stands today

With West Virginia's change, only eight states now tax Social Security benefits to any degree: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont. That's down significantly from just a decade ago, when the number was nearly double that. No state has gone the other direction and adopted a new Social Security tax.

Three factors tend to separate states that have eliminated the tax from those that haven't. Political will is the clearest: West Virginia's phaseout passed with strong bipartisan support, backed by Governor Jim Justice and championed by AARP.

Budget conditions matter just as much — West Virginia was able to absorb a roughly $37 million revenue reduction; states where full elimination would cost hundreds of millions face a harder calculation.

And competitive pressure is real: as more states drop the tax, those that keep it risk losing retirees — and the spending they bring — to friendlier neighbors.

Vermont and Utah loosened rules in 2025

Two of the remaining eight states moved to ease their Social Security taxes in 2025, though neither went all the way to elimination.

Vermont enacted legislation raising the income thresholds at which Social Security benefits qualify for the state's full exemption, increasing the cutoff from $50,000 to $55,000 for single filers and from $65,000 to $70,000 for joint filers, effective for 2025 tax years. A more sweeping bipartisan proposal — which would have phased out Vermont's Social Security tax entirely over eight years — was introduced in the legislature but did not advance.

Utah signed legislation raising the income thresholds at which its Social Security tax credit begins to phase out. Governor Spencer Cox signed the bill in 2025, bumping the single filer threshold from $45,000 to $54,000 and the joint filer threshold from $75,000 to $90,000 — a 20% increase across the board. The change costs the state approximately $24 million and benefits an estimated 88,800 Utahns, saving them an average of $257 per year.

Why other states haven't eliminated the tax yet

Legislators in all eight remaining states introduced bills in 2025 to reduce or eliminate the Social Security tax. Most stalled. Montana's attempted full repeal failed outright, and the state also rolled back some existing deductions during the same session. Minnesota's legislature considered elimination, but the estimated cost — nearly $400 million per year — proved prohibitive, and those bills died in committee. Connecticut introduced legislation to widen its existing exemption; it was referred to committee and did not advance.

That pattern is worth noting: none of the eight states moved backward, and all of them saw active legislative proposals. Lawmakers who came up short in 2025 are expected to reintroduce bills in coming sessions, particularly as the political salience of Social Security grows.

What this means for your tax bill

If you live in one of the eight states that still tax Social Security benefits, your actual exposure depends heavily on your income. Most of these states use income thresholds or phaseouts that exempt lower earners entirely.

Colorado, for example, allows taxpayers 65 and older to deduct all their federally taxed Social Security income from state taxes.

Connecticut fully exempts benefits for single filers with adjusted gross income below $75,000 and joint filers below $100,000 — and applies a 75% exemption above those limits, so only 25% of benefits may be taxed for higher earners.

The trend is clearly toward elimination. But timing and income thresholds vary significantly by state, and this is an area where laws have been changing quickly. Before assuming your state's rules haven't shifted, check directly with your state's department of revenue or a current tax resource — what applied last year may already be outdated.

Bottom line

West Virginia's completed phaseout is the clearest recent proof that eliminating the state Social Security tax is politically achievable — even in a state with tight budget margins.

The remaining eight states aren't ignoring the pressure; they're feeling it. Vermont and Utah have already moved the goalposts, and legislators across the holdouts introduced bills in 2025 that didn't pass but aren't going away.

The question for retirees in Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont isn't really if their state will act — it's when, and whether the income thresholds will cover them when it does. For now, the smartest move is to know exactly where your state stands so you can factor that into your retirement plan.

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Author Details

Chris Lewis, CEPF

Chris Lewis has spent his career turning data into answers. As Director of Digital PR at FinanceBuzz and a Certified Educator in Personal Finance, he oversees the data journalism and media relations teams, digging into the personal finance topics that shape Americans' lives at every stage, from Social Security and retirement income to 401(k) strategies, jobs, and real estate.