Social Security Benefits Still Taxed in 9 States for 2025

Nine States Continue to Tax Social Security Benefits in 2025

Retirement planning requires careful consideration of tax implications, particularly regarding Social Security benefits. While federal taxation of these Social Security benefits is well-known, state-level taxation often receives less attention in financial planning discussions. Understanding how different states handle Social Security taxation is crucial for maximizing retirement income.

Currently, nine states will continue to tax Social Security benefits to varying degrees in 2025. This represents a declining trend, as three states completely eliminated their Social Security benefit taxes beginning in 2024. Additionally, another state has enacted legislation to phase out such taxation by 2026. This reflects ongoing changes in Social Security benefits taxation by state.

For retirees making decisions about where to live during retirement years, knowing which states tax these benefits is essential. State taxation policies on Social Security can significantly impact overall retirement income and financial security.

States that tax Social Security benefits in 2025:

• Colorado
• Connecticut
• Kansas
• Minnesota
• Montana
• New Mexico
• Rhode Island
• Utah
• Vermont

Kansas Eliminated Social Security Taxation Retroactive to January 1, 2024

Kansas previously maintained a straightforward approach to Social Security benefits taxation. Residents with federal adjusted gross income exceeding $75,000 paid state taxes on federally taxed Social Security benefits. Those with incomes at or below this threshold were exempt from state taxation on these benefits.

This policy changed substantially in October when comprehensive tax reduction legislation took effect. The new law completely eliminates taxation on Social Security benefits for Kansas residents, resulting in an estimated annual tax reduction of approximately $150 million for retirees across the state. For more information, visit the official Kansas Department of Revenue.

Additional Kansas State Tax Considerations

• Personal Income Tax Rates – Kansas imposes income tax rates ranging from 3.1% to 5.7%.
• Income Tax on Retirement Account Withdrawals – Kansas taxation begins with federal adjusted gross income. Therefore, distributions from IRA and 401(k) accounts are taxed at the state level to the same extent they are taxed federally, without additional state deductions.
• Sales Taxes – Kansas maintains relatively high sales tax rates. The statewide rate of 6.5% can be supplemented by local governments with up to 4.25% in additional taxes. This results in an average combined rate of 8.654%, ranking ninth-highest nationally.
• Property Taxes – Property tax burdens in Kansas are comparatively high, with a median rate of 1.25%, ranking 13th highest in the United States.
• Estate and Inheritance Taxes – Kansas does not impose estate or inheritance taxes on Social Security or other retirement assets.

Missouri Fully Exempted Social Security Benefits in 2024

In July 2023, Missouri Governor Mike Parson signed legislation completely exempting Social Security benefits from state income taxation regardless of filing status or income level. This exemption became effective January 1, 2024, providing relief for many retirees. For more details, visit the Missouri Department of Revenue.

It should be noted that previous rules still apply to benefits received in 2023 when filing returns due April 15, 2024. Under those regulations, complete exemption was available only to retirees with Missouri adjusted gross income below certain thresholds.