Many retirees choose where to spend their golden years based on sunshine, family proximity, or cost of living. But one factor that often slips under the radar is whether a state taxes Social Security benefits—and by how much. While most states leave these federal benefits alone, a small group still quietly collects tax on them, potentially taking a surprising bite out of your retirement income. The tricky part? How much you pay depends on the state’s rules, your other income sources, and even your filing status.
Knowing which states do this, and how they calculate it, is crucial for protecting your retirement budget. Let’s break down the six states where retirees may face unexpected Social Security taxes and what you can do about it.
1. Colorado
Colorado taxes Social Security benefits, but retirees do get a partial break. The state allows an income exclusion—$24,000 for those 65 and older and $20,000 for those between 55 and 64. However, that doesn’t mean everyone escapes taxation. If your total retirement income from pensions, withdrawals, or investments exceeds these amounts, a portion of your Social Security may still be taxed.
This means that higher-income retirees or those drawing from multiple sources could end up paying more than expected. Many moving to Colorado for the lifestyle and climate don’t realize their retirement income could take a hit unless they carefully plan withdrawals.
2. Connecticut
Connecticut’s approach is complicated. The state exempts Social Security from taxation if your federal adjusted gross income is below $75,000 for individuals or $100,000 for couples. If you’re above those thresholds, 25% of your benefits may be taxed.
While the tax rate isn’t overwhelming, it can still catch retirees off guard, especially those who only recently crossed into higher income brackets due to required minimum distributions (RMDs) or investment gains. This makes income management critical if you’re considering living in Connecticut during retirement.
3. Kansas
Kansas generally taxes Social Security benefits, but with one important exception: if your federal adjusted gross income is $75,000 or less, your benefits are exempt. Go just a dollar over, and you could see a sudden jump in your state tax bill.
This “cliff” effect can be especially punishing for retirees who don’t realize that even a small amount of additional income from a side gig, RMD, or asset sale could push them into taxable territory. Retirees in Kansas need to be especially mindful of managing income streams year-to-year to avoid surprises.
4. Minnesota
Minnesota stands out for following the federal method of calculating how much of your Social Security is taxable. That means up to 85% of your benefits could be subject to state tax, depending on your total income.
While the state has recently introduced a partial exemption for lower-income retirees, middle- and upper-income households still face significant taxation. This system can be harsh on those who saved diligently and now have income from investments or pensions, pushing them into higher brackets.
5. Montana
Montana also follows the federal formula for taxing Social Security, and the thresholds are low enough that many retirees end up paying. If your combined income exceeds $25,000 as an individual or $32,000 as a couple, part of your benefits becomes taxable at both the federal and state levels.
Because these thresholds haven’t been adjusted for inflation in decades, even modest retirement savings can trigger taxation. Retirees moving to Montana for its scenic landscapes and slower pace of life should factor this into their financial planning.
6. Utah
Utah used to fully tax Social Security benefits, but now offers a nonrefundable tax credit to offset some of the cost. The amount of the credit is based on your income, with higher earners seeing the credit reduced or eliminated.
While the change was a step toward being more retiree-friendly, many middle- and upper-income retirees still face a state tax bill on their benefits. For those on fixed incomes, it’s important to calculate whether the tax hit outweighs the benefits of staying in Utah.
Why These States Still Tax Social Security
States that tax Social Security often defend the practice as a way to keep their revenue systems stable while still providing exemptions for lower-income retirees. However, the reality is that these taxes can discourage older adults from settling in or remaining in the state, especially when nearby states offer full exemptions.
These taxes often disproportionately affect retirees who worked hard to save, as their additional income pushes them into taxable ranges. And unlike property taxes, which can be reduced through senior exemptions, Social Security taxes are tied directly to your income level.
Strategies to Minimize the Impact
If you’re living in, or considering moving to, one of these six states, there are ways to reduce or even eliminate the tax impact:
- Manage taxable income carefully: Use tax-efficient withdrawal strategies from retirement accounts to keep income under exemption thresholds.
- Delay Social Security benefits: Waiting until age 70 increases your monthly benefit but can also give you time to draw down other accounts before benefits begin.
- Consider Roth conversions: Moving funds from a traditional IRA to a Roth IRA can lower future taxable income.
- Relocate strategically: If taxes are eating into your benefits, compare the total cost of living in a no-tax state before making a move.
The Bottom Line on Social Security Taxes in Retirement
While most states leave Social Security benefits alone, these six states continue to tax them, sometimes in ways that quietly erode your retirement income. The rules vary widely, from flat exemptions to complicated income-based formulas, meaning retirees need to pay close attention to how much they might owe.
If you live in or plan to move to one of these states, the key is understanding their tax rules and structuring your income to minimize the impact. With careful planning, you can protect your Social Security benefits and keep more of your hard-earned retirement income where it belongs—supporting your lifestyle, not your state’s treasury.
How to Protect Your Retirement Income From State Taxes on Social Security
For retirees, every dollar counts, and losing part of your Social Security to state taxes can make a noticeable difference. By learning the specific rules in your state, managing your taxable income, and exploring relocation options, you can take control of how much you pay. Don’t let a lack of awareness drain your benefits—knowledge and planning are your best defenses.
Would you consider moving to another state if it meant paying no taxes on your Social Security benefits?
Read More:
7 Mistakes You’re Making With Social Security Benefits And Don’t Know It
9 Social Security Assumptions That Will Cost You Thousands
Riley Jones is an Arizona native with over nine years of writing experience. From personal finance to travel to digital marketing to pop culture, she’s written about everything under the sun. When she’s not writing, she’s spending her time outside, reading, or cuddling with her two corgis.
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