Retirees in nine states—Colorado, Connecticut, Kansas, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont—could see reductions in their Social Security checks due to state-level income taxes on benefits. While 41 states won’t tax Social Security income, these nine still do, impacting how much retirees receive monthly. Although one of these states plans to eliminate this tax in 2026, residents should take immediate steps to protect their income.
Colorado
In Colorado, Social Security benefits can be taxed based on combined income thresholds, with up to 85% of benefits potentially taxable. This means that retirees with higher incomes may see a significant portion of their benefits subject to state taxes. For example, a senior with an annual income of $50,000 might find several hundred dollars subtracted annually from their Social Security through state tax withholding. To mitigate these effects, Colorado retirees can consider maximizing pension deductions or consulting tax professionals to reduce the taxable portions of their benefits.
Connecticut
Connecticut taxes Social Security benefits for higher-income retirees by including them in the adjusted gross income without a full exemption for those above certain limits. This policy can lead to direct subtractions from Social Security checks due to IRS coordination with state taxes. Retirees in Connecticut can adjust their withholdings or explore senior circuit breaker credits to offset potential losses from Social Security taxation. As highlighted in recent reporting, retirees in these nine states risk losing some Social Security checks, with Connecticut serving as a prime example of states where IRS and state tax coordination can lead to direct subtractions.
Kansas
Kansas currently taxes Social Security benefits for individuals with incomes over $75,000, leading to IRS adjustments on benefit payments. However, Kansas is set to eliminate this tax in 2026, joining the 41 states that won’t tax such income. Until then, retirees may face up to a 5.7% state tax on benefits. To prepare for this transition, retirees should engage in income planning to minimize short-term subtractions and ensure a smoother financial future.
Minnesota
Minnesota employs a graduated tax on Social Security, exempting only a small portion for low-income seniors while taxing up to 85% for others. This tax is integrated with federal IRS reporting, potentially reducing benefits through state-IRS mechanisms. Retirees in Minnesota should review their combined income for exemptions and consider relocating to a non-taxing state to avoid ongoing subtractions. Recent reporting underscores Minnesota’s role in potential benefit reductions, emphasizing the need for proactive financial planning.
Montana
Montana includes Social Security in taxable income, with rates up to 6.75% applying after federal adjustments. This results in direct IRS subtractions for state liabilities. Retirees with moderate pensions might see 4-5% of their benefits effectively withheld due to state tax rules. To counteract the financial hit from Social Security taxation, Montana residents can utilize property tax relief programs alongside federal strategies.
New Mexico
New Mexico’s taxation framework fully taxes Social Security benefits without broad exemptions, leading to IRS-coordinated deductions from monthly checks. As reported, American retirees in these nine states could lose some of their Social Security benefits soon. New Mexico seniors can take practical steps such as optimizing Roth IRA conversions to lower taxable Social Security portions before state taxes apply.
Rhode Island
Rhode Island taxes Social Security benefits as ordinary income, with no deduction for most retirees. This facilitates IRS subtractions tied to state returns. The state’s 5.99% top rate could subtract hundreds from annual Social Security for middle-income households. Retirees in Rhode Island can leverage the state’s senior property tax relief to balance out the effects of benefit taxation.
Utah
Utah applies a flat 4.65% tax on Social Security income after federal tiers, resulting in proportional IRS reductions from benefit payments. This ongoing policy contrasts with the 41 states that won’t tax benefits. Utah retirees can employ income deferral techniques to reduce the taxable share of Social Security and limit subtractions.
Vermont
Vermont taxes Social Security for those with incomes above $50,000, where up to 85% is includable, enforced through IRS-state data sharing for withholdings. Vermont seniors might face 8.75% effective rates on taxed benefits, leading to noticeable monthly check reductions. Comprehensive strategies, including the three ASAP steps from recent guidance, can help minimize or avoid tax-related subtractions in Vermont.
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Nathaniel Cross focuses on retirement planning, employer benefits, and long-term income security. His writing covers pensions, social programs, investment vehicles, and strategies designed to protect financial independence later in life. At The Daily Overview, Nathaniel provides practical insight to help readers plan with confidence and foresight.
