The average Social Security benefit is expected to be about $1,976 per month for retired workers in 2025. That amounts to about $24,000 per year, but most retirees won't get to keep that much. For starters, those on Medicare usually have their Part B premiums withheld from their Social Security checks. Then, there are federal Social Security benefit taxes that apply to some retirees with incomes over certain thresholds.
Some states also tax Social Security benefits as well. But these taxes are slowly starting to disappear over time. Residents in the following two states will owe fewer income taxes on their Social Security benefits in 2025, which could help them stretch their personal savings a little further.
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1. Colorado
Colorado already had a law in place that enabled those 65 and older to subtract their Social Security benefits from their state taxable income if those benefits were included in their federal taxable income. This option was only available to those with adjusted gross incomes (AGIs) of $75,000 or less for individual filers and $95,000 for married couples filing jointly.
While helpful for many seniors, the act didn't cover those claiming Social Security retirement benefits under the age of 65 or those claiming other types of benefits, like disability or survivors benefits, before this age.
Beginning in 2025, the state is expanding its current law to include all those aged 55 and older. The AGI limits still apply. Keep in mind that Social Security benefits that aren't taxable at the federal level aren't excludable from state income taxes, so it's possible that some Coloradans could still owe some state taxes on their benefits.
2. West Virginia
Beginning in 2022, West Virginia exempted Social Security benefits from state income tax for individuals with federal AGIs of $50,000 or less and married couples filing jointly with AGIs of $100,000 or less. But it too plans to expand this law, permitting a greater number of its residents to keep more of their Social Security benefits.
It's a gradual process that's unfolding over a few years. In 2024, those with AGIs over the above thresholds were able to exempt 35% of their Social Security benefits from their state income taxes. In 2025, this amount will climb to 65%. And in 2026 and beyond, West Virginians won't owe any state Social Security benefit taxes at all.
What other states tax Social Security benefits?
In addition to Colorado and West Virginia, the following states will tax the Social Security benefits of at least some of their retirees in 2025:
- Connecticut
- Minnesota
- Montana
- New Mexico
- Rhode Island
- Utah
- Vermont
But just because you live in one of them doesn't mean you'll automatically owe the state a cut of your checks. Each state has its own rules that determine who could owe income taxes on their Social Security benefits. Most exempt those with AGIs below certain limits, like in the Colorado and West Virginia examples above, or something similar.
If you're concerned about owing state Social Security benefit taxes in 2025, check with your state department of taxation or an accountant to learn how it calculates these taxes. It's best to set some money aside for these taxes ahead of time so you're not caught off guard by them.
