Social Security, USA News: Living in a state that taxes Social Security sounds like a financial gut punch, but the reality for most retirees is far more complicated and possibly much less painful than expected. Social Security is a crucial stream of income for millions of retirees today, and without those monthly checks, many older Americans would not be able to make ends meet.
In some cases, retirees may not be able to keep their Social Security checks in full. Not only can benefits be taxable at the federal level, but state taxes can also apply depending on location. However, just because a resident lives in a state that taxes Social Security does not mean they will automatically have to fork over a chunk of their benefits.
Changes and Remaining States
The list of states imposing taxes on Social Security benefits has shrunk over time. Several states have phased out their tax on benefits in recent years, recognizing the importance of the income stream. West Virginia finished phasing out its tax on Social Security benefits at the very start of 2026, meaning taxpayers at all income limits are no longer on the hook.
There are eight states that still impose taxes on Social Security benefits. Despite this, middle- and lower-income retirees rarely pay state taxes on their benefits thanks to built-in exemptions. For example, in New Mexico, Social Security recipients earning up to $100,000 a year do not pay taxes on their benefits, and that threshold rises to $150,000 for couples.
Federal Taxes and Guidance
While escaping state taxes is often possible, taxes also exist at the federal level and kick in at very low levels of income. Thanks to the $6,000 senior tax deduction from the One Big Beautiful Bill Act, many Social Security recipients are currently exempt from federal benefit taxation, though those taxes could return once the tax break expires in a few years.
Average earners whose sole source of income is Social Security are unlikely to have their benefits taxed. Moderate or larger retirement incomes are where those taxes tend to apply. Consulting a tax professional prior to filing for Social Security can help individuals understand potential tax obligations and identify tax savings.
