Retirement Social Security

A Major Social Security Tax Change Just Happened in This State

Where your Social Security income remains fully exempt from state taxes and what it means for your retirement plan.

By Adam Palasciano , Edited by Sara Albertelli

Updated March 22, 2026

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If you rely on Social Security benefits and are mapping out your retirement plan, the state tax treatment of those benefits should be on your radar. Fortunately, most U.S. states don't tax Social Security at the state level, and one state that used to has now completely phased this out. The implications: state taxes can meaningfully impact your net retirement income, especially in combination with federal tax rules.

Here's a closer look at what retirees should know.

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West Virginia has phased out taxes on Social Security

While West Virginia previously taxed benefits, it successfully phased out its taxation of Social Security income, a major shift for retirees in the Mountain State. The law passed in March 2024 set a three-year phase-out schedule:

A 35% reduction in tax year 2024
A 65% reduction in tax year 2025
A 100% reduction and full phase out, effective on January 1, 2026

The change applies to all Social Security recipients residing in the state, regardless of income level, and has benefited about 50,000 households. As a result, West Virginia has joined the ranks of states that don't tax Social Security benefits at the state level, a meaningful detail for retirees considering relocation or budgeting their income.

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Only these 8 states still tax SS benefits

At least some portion of your benefits may be subject to state tax if you live in one of these eight states:

Colorado
Connecticut
Minnesota
Montana
New Mexico
Rhode Island
Utah
Vermont

Each state sets its own rules around how much of your Social Security income is taxable, often based on your adjusted gross income (AGI) and filing status. Because the thresholds and deduction rules can vary widely, retirees in these states need to dig into their specific state guidelines rather than assume full taxability or exemption.

It's worth mentioning that Colorado is actively working to reduce Social Security taxes on retirees, but the tax has yet to be entirely eliminated.

These states plus D.C. don't tax SS benefits

These states (plus the District of Columbia) either fully exempt Social Security benefits or have effective policies allowing for tax credits or exemptions that result in no taxation on benefits:

Alabama
Arizona
Arkansas
California
Delaware
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Mississippi
Missouri
Nebraska
New Jersey
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
South Carolina
Virginia
West Virginia
Wisconsin
Washington, D.C.

Meanwhile, these states don't have any state income tax at all, which means no state tax on Social Security either:

Alaska
Florida
Nevada
New Hampshire
South Dakota
Tennessee
Texas
Washington
Wyoming

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How state taxes may impact SS benefits on top of federal taxes

There are several factors to consider regarding how the combined impact of state and federal taxes may impact your benefits.

Federal taxation still applies

Even if your state exempts Social Security benefits, you may still owe federal tax. Up to 85% of your benefits are taxable depending on your total income.

Combined tax burden matters

When you live in a state that taxes Social Security, the combined federal and state tax burden can reduce your net benefit more than you expect, potentially affecting your budgeting, health care decisions, or retirement timing.

State tax trends should influence relocation choices

If you're relocating for retirement, choosing a state that doesn't tax Social Security can enhance your income longevity and allow you to allocate more of your benefits toward housing, health care, or lifestyle.

What retirees should do now

Check your state's current rules: If you live in one of the states that still taxes Social Security, review how your AGI affects your taxability and whether future changes may apply to you in order to prepare financially.
Estimate your post-tax income: Run scenarios for both federal and state taxes on your Social Security and other retirement income to understand your net cash flow.
Consider relocation or income structuring: If you're within reach of a tax-friendly state and your lifestyle allows, moving may yield substantial tax savings over time.

Stay updated on policy shifts: Tax rules can change, so monitor legislative actions in your current state or your target retirement state.

Bottom line

If you now live in a state that doesn't tax Social Security benefits, you're already in the majority of U.S. retirees, and the tax-friendly status can boost your net income. With just eight states still taxing those benefits, the trend clearly favors retirees in tax-exempt states. Consider the impact of state taxes on Social Security benefits when deciding where to move, your budgeting plans, and your income strategy. This way, you can truly set yourself up for retirement and enjoy your golden years to the fullest.

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