Which seven states will tax Social Security benefits in 2026 and what are their exemption rules?
Executive summary
Seven states are expected to tax at least some Social Security benefits in 2026: Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah and Vermont; West Virginia completes a phase‑out in 2026 and will no longer tax benefits (Business Insider; Coastal Moving Services) [1] [2].
1. A snapshot: who still takes a cut and why it matters
Most U.S. states do not tax Social Security, but a small group retains state-level rules that can subject benefits to taxation for higher‑income retirees; reporting and tax guides converge on a seven‑state list for 2026 after West Virginia’s phase‑out (Business Insider; Coastal Moving Services) [1] [2].
2. Connecticut: income‑tested exemptions rather than a full carve‑out
Connecticut treats Social Security as part of state taxable income but provides exclusions and phaseouts tied to adjusted gross income so many moderate‑income retirees pay little or nothing while higher earners remain partially taxable (Coastal Moving Services; Business Insider) [2] [1].
3. Minnesota: subtraction with phaseout based on AGI
Minnesota’s system mirrors federal treatment but layers a state subtraction that can exempt part or all federally taxable Social Security income; that subtraction begins to phase out at specified AGI thresholds (Minnesota House Research) [3].
4. Montana: thresholds that create tiers of taxation
Montana applies ordinary income tax rates to benefits but exempts Social Security for very low AGI levels, makes benefits partially taxable up to higher thresholds, and reaches fuller taxation only for relatively higher incomes — for example, no tax if AGI is below roughly $25,000 for singles and $32,000 for joint filers, with partial taxation above those marks (Mercer Advisors) [4].
5. New Mexico: a high AGI exemption ceiling for many retirees
New Mexico’s law exempts Social Security for residents whose AGI falls below a comparatively high ceiling — recent guides note an exemption for residents with AGI up to $100,000 ($150,000 for joint filers) with standard state tax applying above that limit (Mercer Advisors; CNBC Select) [4] [5].
6. Rhode Island: age and AGI gates to exemption
Rhode Island’s rules exempt beneficiaries who have reached full retirement age and whose AGI is below specified limits (reporting cites AGI thresholds such as about $107,000 for single filers and higher joint limits), while benefits above those thresholds become subject to the state’s income tax brackets (CNBC Select) [5].
7. Utah: flat rate with a refundable/nonrefundable credit structure
Utah taxes Social Security as ordinary income under its flat rate regime but offers a Social Security Benefits Credit that can substantially reduce or eliminate state tax for many retirees; the credit phases down as modified AGI rises and is structured to favor lower‑ and moderate‑income beneficiaries (CNBC Select) [5].
8. Vermont: income bands that produce full or partial exemptions
Vermont allows full exemption of federally taxable Social Security benefits for many filers under set AGI limits (for example, single filers exempt at lower AGI bands and married filers at higher bands) and then provides partial exemptions in an intermediate range before benefits become fully taxable at higher incomes (Fidelity; Inkl) [6] [7].
The practical takeaway from state guidance and tax summaries is that although seven states still have rules that can subject Social Security to state income tax in 2026, most retirees in those states will pay nothing because of exemptions, subtractions or credits tied to filing status and adjusted gross income; for precise, personal calculations taxpayers should consult their state revenue department or a tax professional because the cited summaries report different thresholds and phaseout formulas across states (Business Insider; Mercer Advisors; CNBC Select; Minnesota House Research) [1] [4] [5] [3].