Did you know that where you live could determine whether you pay taxes on your Social Security benefits in retirement? It’s true—and it could significantly impact your financial comfort in your golden years. While most states leave your Social Security checks untouched, a handful still impose taxes on them. If you’re in one of these states, your retirement income in 2026 might look very different from what you’re expecting. But here’s where it gets controversial: some argue that taxing Social Security is unfair, while others see it as a necessary revenue stream for state budgets. Let’s dive into the details and explore which states still tax Social Security, how their rules work, and what it means for you.
The States That Still Tax Social Security—And What It Means for You
Below, we’ll break down the eight states that still tax Social Security benefits, along with their specific rules for 2026. We’ll also highlight some surprising exemptions and thresholds that could save you money—or cost you more than you bargained for.
1. Colorado
Colorado has taken steps to ease the tax burden on retirees. Starting in 2025, and continuing into 2026, many older residents pay no state tax on their federally taxable Social Security benefits. Here’s how it works:
- Age 65 and older: You can subtract 100% of your federally taxable Social Security income.
- Ages 55–64: You can also subtract 100% if your federal adjusted gross income (AGI) is under $75,000 (single) or $95,000 (married filing jointly).
- Higher-income earners ages 55–64: You can still subtract up to $20,000 of benefits.
- Under 55: No special subtraction applies.
After any subtraction, Colorado taxes the remaining income at a flat 4.4% rate. This progressive approach aims to protect lower-income retirees while still generating revenue from wealthier residents. But is it enough? Some argue that even this partial exemption doesn’t go far enough to support seniors.
2. Connecticut
Connecticut technically taxes Social Security, but most retirees end up paying nothing. In 2026, you’ll owe no state tax on federally taxable Social Security if your federal AGI stays under:
- $75,000 for single filers
- $100,000 for married couples filing jointly
Above these thresholds, Connecticut taxes up to 25% of your Social Security benefits. The taxable portion is treated as ordinary income and taxed at regular state rates, which can reach up to 6.99%. This system is designed to target higher earners, but it raises questions: Should Social Security be taxed at all, or is it a lifeline that should remain untouched?
3. Montana
Montana taxes Social Security as ordinary income but offers a small break for older retirees. In 2026, taxpayers 65 or older can subtract $5,660 from their income, which can offset federally taxable Social Security. If you’re under 65, there’s no special subtraction, and all taxable benefits are subject to state tax. Montana’s income tax rates range from 4.7% to 5.65%, depending on your income level. While this deduction helps older retirees, younger ones often face higher tax bills. Is this age-based approach fair, or should all retirees receive the same treatment?
4. New Mexico
New Mexico offers one of the most generous Social Security exemptions in the country. In 2026, you owe no state tax on Social Security if your income stays under:
- $100,000 for single filers
- $150,000 for married couples filing jointly
If your income exceeds these thresholds, only the taxable portion of your benefits is subject to New Mexico’s regular income tax rates, which range from 1.7% to 5.9%. This broad exemption benefits many retirees, but it also means the state relies more heavily on other tax sources. Is this a sustainable model, or does it place too much burden on non-retirees?
5. Rhode Island
Rhode Island exempts Social Security only for retirees who meet both an age test and an income test. You must be at full retirement age (usually 66 or 67) to qualify. If you meet the age rule, you can exclude 100% of federally taxable Social Security only if your federal AGI is below the state’s limits. For 2025, those cutoffs are about $107,000 for single filers and $133,750 for married couples filing jointly. Once your income rises above the threshold, Rhode Island taxes the federally taxable portion of Social Security at rates up to 5.99%. This strict approach ensures that only lower-income retirees benefit. But is it too restrictive, or does it strike the right balance?
6. Vermont
Vermont taxes Social Security for higher-income retirees,
