Social Security benefits have reached an unprecedented monthly average of $2,071, marking a high point for retirees relying on this income stream. Despite this increase, many seniors encounter challenges in subsisting solely on their Social Security benefits. Economic pressures and living costs require careful budgeting, and this is compounded in certain states where a portion of these benefits is subject to state income taxes.
Fortunately, the practice of taxing Social Security benefits at the state level is diminishing in popularity. While the majority of states have eliminated taxes on these benefits, eight states continue to do so in 2026. Residents within these jurisdictions may find that a part of their Social Security benefits is taxable at the state level, which can affect their overall retirement income.
State-Level Taxation of Social Security Benefits in 2026
Eight states maintain taxes on Social Security benefits as part of their state income tax systems for the year 2026. These states include:
- Colorado
- Connecticut
- Minnesota
- Montana
- New Mexico
- Rhode Island
- Utah
- Vermont
It is notable that West Virginia recently adjusted its stance on this issue. Until 2022, West Virginia included Social Security benefits in its state taxable income. However, it commenced a phase-out of these taxes starting that year. Those with adjusted gross incomes (AGIs) up to $50,000 for single filers and $100,000 for joint filers have since been exempt from paying state taxes on Social Security benefits.
For individuals with incomes exceeding those limits in West Virginia, state taxation could apply on a portion of their Social Security income when filing in 2025. However, forthcoming changes in 2026 will eliminate the taxation of Social Security benefits entirely in the state.
Seniors residing in other states that tax Social Security benefits may nevertheless qualify for exemption or reduced taxation if their incomes fall below certain thresholds. It is advisable for elderly taxpayers to consult with tax professionals or review state tax department guidelines to understand the specifics of their state’s rules.
Federal Taxation Remains a Consideration
At the federal level, Social Security benefits remain taxable depending on the recipient’s provisional income. This provisional income is calculated by adding your adjusted gross income to any non-taxable interest (such as municipal bond interest) and one-half of your Social Security benefits for the year.
For illustration, an individual with an AGI of $40,000 who receives $20,000 in Social Security benefits would have a provisional income of $50,000.
The threshold limits dictating the taxable portion of Social Security benefits are defined as follows, categorized by marital status:
| Marital Status | 0% Taxable If Provisional Income Is Under | Up to 50% Taxable If Provisional Income Is Between | Up to 85% Taxable If Provisional Income Is Over |
|---|---|---|---|
| Single | $25,000 | $25,000 to $34,000 | $34,000 |
| Married Filing Jointly | $32,000 | $32,000 to $44,000 | $44,000 |
These amounts have not been adjusted for inflation, heightening the likelihood over time that more retirees will find themselves in taxable brackets as living expenses rise. This situation can result in increased tax liabilities on Social Security income for older Americans.
Strategies to Manage Social Security Tax Obligations
Retirees seeking to minimize taxation on their Social Security benefits face several considerations. One fundamental approach involves managing adjusted gross income by limiting withdrawals from tax-deferred retirement accounts such as traditional 401(k)s or IRAs, since these distributions increase AGI and thus provisional income.
Conversely, withdrawals from Roth accounts do not contribute to AGI and could allow greater income flexibility without triggering higher Social Security taxation.
When avoiding taxable Social Security benefits proves impractical, beneficiaries can prepare by either saving funds aside specifically for tax payments or by arranging for withholding of federal taxes directly from their Social Security payments through the Social Security Administration.
Engaging a qualified tax professional is highly recommended to accurately estimate tax liabilities based on individual financial circumstances and to explore other potential strategies for reducing provisional income.