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American seniors are heavily reliant on Social Security to make ends meet. Six in 10 retirees said their benefits are a major source of income in the most recent iteration of an annual Gallup poll. That’s one of the highest responses since the poll’s inception in 2002.

Considering the huge importance of Social Security to retirees, it’s essential for them to keep as much of their benefits as possible. Unfortunately, for some seniors living in nine states, they could see taxes take a big bite out of their monthly checks. Some retirees could lose up to 10% of their benefits to state taxes, depending on their income and where they live.

Social Security card and a check from the U.S. Treasury sandwiched between hundred-dollar bills.

Image source: Getty Images.

How the federal government taxes Social Security

While each state has its own rules and tax rates for Social Security, every American is potentially subject to taxes on Social Security income from the federal government.

The IRS determines how much, if any, of your Social Security benefits are subject to income tax based on a metric called “combined income.” To determine your combined income, take half of your Social Security income and add to it your adjusted gross income and any untaxed interest income. If that number exceeds the thresholds below, up to 85% of your Social Security benefits could count as taxable income.

Taxable Portion of Benefits	Combined Income, Individual	Combined Income, Filing Jointly
0%	Less than $25,000	Less than $32,000
Up to 50%	Between $25,000 and $34,000	Between $32,000 and $44,000
Up to 85%	More than $34,000	More than $44,000

Data source: Internal Revenue Service.

You might notice that the thresholds for combined income are relatively low. Considering the average retiree collects about $2,000 per month in Social Security, it doesn’t take much to push a married couple into taxable territory. Congress hasn’t updated those thresholds since enacting the laws that set them more than 30 years ago, and there’s no built-in inflation adjustment. As a result, more and more retirees are facing Social Security taxes at the federal level each year.

But the challenge is even worse for retirees living in the following nine states. They could be subject to state taxes as well.

Nine states that could take some of your Social Security benefits

Several states have eliminated taxes on Social Security benefits in recent years, including Kansas, Missouri, and Nebraska. There remain just nine states that still tax a portion of residents’ Social Security benefits, depending on their income. If you live in one of them, it may be worth exploring your options to avoid taxation on your benefits, so you can keep more money for your retirement budget.

Here are the basics.

Colorado: Taxpayers 65 or older or those with an adjusted gross income below $75,000 for individuals or $95,000 for joint filers are exempt from taxes on Social Security. Those with higher AGIs under age 65 can deduct up to $20,000 of the amount of Social Security income included on their federal tax return. Any amount above that will incur a 4.4% tax.

Connecticut: Taxpayers with adjusted gross income below $75,000 for individuals or $100,000 for joint filers are exempt from taxes on Social Security. Taxable benefits are limited to 25% of the total received for those with higher AGIs. The applicable tax rate ranges from 4.5% to 6.99%, depending on income.

Minnesota: Taxpayers with adjusted gross income below $84,490 for individuals and $108,320 for joint filers are exempt from taxes on Social Security. Every $4,000 of AGI above those thresholds increases the amount subject to taxes by 10% of the total benefits included on your federal income. The applicable tax rate ranges from 6.8% to 9.85%.

Montana: Any amount of benefits included in your federal income is also taxable at the state level. Taxpayers over the age of 65 receive an additional $5,660 deduction on their state taxes. The tax rate ranges from 4.7% to 5.9%.

New Mexico: Taxpayers with adjusted gross income below $100,000 for individuals and $150,000 for joint filers are exempt from taxes on Social Security. All other taxpayers must pay income tax on any amount included in their federal income. The applicable tax rate ranges from 4.9% to 5.9%.

Rhode Island: Taxpayers with adjusted gross income below $104,200 for individuals and $130,250 for joint filers are exempt from taxes on Social Security. All other taxpayers are taxed on any benefits included in their federal income. The applicable tax rate ranges from 4.75% to 5.99%.

Utah: Any Social Security income included in your federal taxes is also subject to state taxes. Taxpayers with adjusted gross income below $45,000 for individuals and $75,000 for joint filers qualify for a tax credit offsetting the taxes on Social Security included in their federal income. Those above the threshold may qualify for a partial credit. The applicable tax rate is 4.55%.

Vermont: Taxpayers with adjusted gross incomes below $50,000 for individuals and $65,000 for joint filers are exempt from taxes on Social Security income. Those within $10,000 of each threshold will qualify for a partial deduction. Those with AGIs exceeding $60,000 for individuals and $75,000 for joint filers will owe taxes on any amount of benefits included in their federal income. The applicable tax rate ranges from 3.35% to 8.75%.

West Virginia: Taxpayers with adjusted gross incomes less than $50,000 for individuals or $100,000 for joint filers are exempt from taxes on Social Security. Those with higher AGIs will owe taxes on 35% of any Social Security income included as part of their federal income. The applicable tax rate ranges from 4.44% to 4.82%. However, West Virginia will no longer tax Social Security income for anyone starting in 2026.

Planning your retirement isn’t just about avoiding taxes

While taxes can be a big drag on your retirement budget, they shouldn’t dictate where you retire. If you want to retire to the mountain communities of Colorado or Utah, potential taxes on your Social Security shouldn’t hold you back. The cost of traveling to the mountains multiple times per year will likely outweigh the increased taxes of living there.

You should also consider things like the cost of living, community, and proximity to family and friends in your retirement decision. If you optimize for those factors, it’s probably worth paying a little more in taxes.

Importantly, there are ways to avoid taxes on Social Security benefits by planning ahead. You can position your retirement and brokerage accounts to minimize your adjusted gross income, by taking capital gains and converting pre-tax retirement accounts to Roth accounts before starting Social Security. You’ll have to weigh the long-term benefit to these strategies, as those moves usually result in a higher tax bill upfront. A tax professional or financial planner can help.

On top of all that, you might find that your retirement destination changes its Social Security tax policy in the near future. West Virginia will eliminate the tax next year, and several other state legislatures have proposed bills to eliminate the tax as well. So you might be basing a decision on a policy that you’re bound to outlive.