How state benefit treatment could change

There is a movement to eliminate taxes on Social Security benefits so retirees can keep more money in their pockets.

This includes not only any federal taxes that apply to that income, but also any state taxes that apply to your benefits.

“Currently, eight states still tax Social Security to some degree,” John Hischta, AARP’s senior vice president of campaigns, said during a Jan. 15 briefing on the 2026 tax filing season.

These states are Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont.

“We are actively working to change this situation,” Hishta said.

Hischta said the elimination of state taxes on Social Security benefits, combined with the recently enacted temporary federal senior credit of up to $6,000 per eligible individual, would create “meaningful, tangible savings that will help older Americans cover necessities like groceries, prescriptions, and utilities.”

During his campaign, President Donald Trump touted his plan to eliminate taxes on Social Security benefits.

The “Big and Beautiful” tax plan that President Trump signed into law in July instead introduced another change that would curb the existing federal tax impact on benefits: a senior “bonus” or credit of up to $6,000 for each eligible taxpayer age 65 and older. Because the law was passed by reconciliation, or a one-party majority, lawmakers could not eliminate taxes on Social Security benefits.

The Council of Economic Advisers, an agency within the president’s office, estimated in June that for 88% of seniors, their total deductions from the One Big Beautiful Bill Act could exceed their taxable Social Security benefits.

However, your Social Security benefit income is still subject to federal tax. These levies are progressive, with high-income earners paying taxes on the majority of their benefits. Low-income beneficiaries, on the other hand, do not have to pay federal taxes on their Social Security benefits.

Social Security recipients may also have to pay state taxes on their benefits, depending on where they live.

Most states don’t tax Social Security benefits, said Carl Davis, research director at the Institute on Taxation and Economic Policy, a nonprofit, nonpartisan tax policy organization.

In states that currently offer tax benefits, these taxes typically apply to higher income thresholds. As a result, the proposal to eliminate state taxes on Social Security benefits is targeted at high-income retirees, unlike the new federal senior citizen credit.

“Low-income retirees are already exempt from paying state taxes on Social Security,” Davis said. “The question is whether high-income retirees should also be given special leave.”

Kansas, Missouri and Nebraska all eliminated state taxes on Social Security in 2024, according to AARP. As of January 1, Social Security benefits are 100% tax deductible in West Virginia.

Other states that still tax Social Security income, such as Rhode Island and Minnesota, have also proposed eliminating those taxes.

“In these states, a large portion of Social Security income is already exempt from state taxes, so enacting the additional exemption is actually targeted at higher-income retirees,” Davis said.

If Rhode Island were to move to fully tax-free Social Security benefits, ITEP estimates that 75% of the savings would be distributed to the state’s top 20% of income households.

In Minnesota, about 58% of Social Security tax cuts go to high-income residents, according to ITEP. Meanwhile, households with moderate incomes may receive smaller tax breaks or no benefit at all, according to the research agency.

“Momentum is building for special carve-outs for seniors,” Davis said. “This has shifted much of the responsibility for funding government to young people and young families.”

Pro-senior tax changes are often aimed at encouraging residents to live in a particular state, but research from the University of New Hampshire and others has found that these tax breaks don’t necessarily influence these decisions.