How state treatment of benefits may change

There’s a push to end taxes on Social Security benefits to help retirees keep more money in their pockets.

That includes not only federal levies that may apply to that income, but also state taxes that may apply to benefits.`

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

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

“We’re actively working to change that,” Hishta said.

Eliminating state taxes on Social Security benefits — combined with the recently enacted temporary federal senior deduction of up to $6,000 per qualifying individual — would help provide “meaningful, tangible savings that help older Americans cover essentials like groceries, prescriptions and utility bills,” Hishta said.

The “big beautiful” tax package that Trump signed into law in July instead implemented a different change — a senior “bonus” or deduction of up to $6,000 per eligible taxpayer age 65 and over — that curbs the effects of existing federal levies on benefits. Because the law was passed through 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 executive office, estimated in June that 88% of seniors may see their total deductions from the One Big Beautiful Bill Act exceed their taxable Social Security benefits.

However, federal taxes still apply to Social Security benefit income. Those levies are progressive — higher earners pay taxes on a larger portion of their benefits. Meanwhile, low-income beneficiaries may pay no federal taxes on their Social Security benefits.

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

Most states do not tax Social Security benefits, according to Carl Davis, research director at the Institute on Taxation and Economic Policy, a non-profit, nonpartisan tax policy organization.

In states that currently do tax benefits, those levies typically apply at higher income thresholds. Consequently, proposals to eliminate state taxes on Social Security benefits, unlike the new federal senior deduction, target higher-income retirees.

“Low-income retirees already are exempt from state tax on Social Security,” Davis said. “The question is whether higher-income retirees should get a special break as well.”

In 2024, Kansas, Missouri and Nebraska all ended state taxes on Social Security, according to AARP. As of Jan. 1, West Virginia now has a 100% tax deduction on Social Security benefits.

Some other states that still tax Social Security income, such as Rhode Island and Minnesota, have proposals to end those taxes.

“Because a large chunk of Social Security income is already exempt from state tax in these states, enacting an additional exemption is really geared towards retirees at the higher end of the income scale,” Davis said.

If Rhode Island moved to a full tax exemption on Social Security benefits, ITEP estimates that 75% of the savings would go to the top 20% of households by income in that state.

In Minnesota, about 58% of the Social Security tax cuts would go to the highest income residents, according to ITEP. Meanwhile, modest-income households would receive smaller tax cuts or may not benefit from the change at all, according to the research organization.

“The momentum has been toward these special carve-outs for older adults,” Davis said. “That has shifted more of the responsibility for funding government on the young people and young families.”

While tax changes favoring seniors are often aimed at encouraging residents to live in certain states, research from the University of New Hampshire and others has found that those tax breaks do not necessarily influence those decisions.