Which states have eliminated Social Security taxation since 2020 and how did those changes impact state budgets?
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Executive summary
Three Midwestern states — Kansas, Missouri and Nebraska — moved in recent years to eliminate state taxation of Social Security benefits, and West Virginia has enacted a phased elimination that completes in 2026; other states have trimmed or broadened age‑ or income‑based exemptions without fully ending taxation [1] [2] [3] [4]. Reporting indicates these state tax rolls reductions occurred amid a federal pandemic‑era revenue boost that eased short‑term budget pressure, while lawmakers and budget analysts warn that forgone revenue creates longer‑term tradeoffs that vary by state and were often covered only qualitatively in available sources [4] [5].
1. Which states actually eliminated the tax on Social Security since 2020 — the concrete winners
By late 2024 and into 2025, several states formally removed the state income tax on Social Security for most residents: Kansas, Missouri and Nebraska are repeatedly cited as having eliminated Social Security taxation in that window, raising the number of states that do not tax benefits to 41 (or soon 42) according to multiple state‑tax roundups and retirement guides [1] [6] [7]. West Virginia is on an explicit phase‑out schedule and is set to eliminate taxation entirely in 2026, per reporting synthesizing legislative schedules [2] [3]. Other states — including Colorado, Connecticut, Minnesota, New Mexico and Utah — have adopted significant age‑ or income‑based deductions or exemptions rather than blanket eliminations [4].
2. How lawmakers justified the cuts — the political and fiscal framing
State officials framed the changes as retiree‑friendly tax relief that helps seniors cope with cost‑of‑living pressures, and political leaders often highlighted the popularity of eliminating the tax as part of broader tax‑cut agendas [5] [7]. Tax Notes and other reporting, however, make plain that many of these decisions occurred in the context of large federal transfers tied to the COVID relief packages, with state budget offices enjoying temporary revenue cushions that made politically attractive tax reductions more feasible in the short term [4]. In some states, proposals to go further stalled when lawmakers confronted tighter baseline budgets — Utah lawmakers, for example, cited a constrained “socks and underwear” budget as the reason a full repeal couldn’t be funded in 2025 [5].
3. Budgetary impact — what the reporting says and what it doesn’t
Public reporting establishes the qualitative fiscal mechanics: eliminating state taxation of Social Security reduces state income tax receipts and therefore tightens future fiscal capacity unless offset by other revenue sources or spending cuts; Tax Notes explicitly links the wave of retiree tax cuts to pandemic‑era federal aid that temporarily boosted state revenues and thus enabled lawmakers to pursue reductions [4]. None of the assembled sources supply uniform, statewide dollar figures showing net budgetary losses tied solely to Social Security tax eliminations, so precise fiscal impacts—lost revenue dollars, offsets deployed, or program cuts avoided—are not documented in the provided reporting [4]. The absence of hard numbers in these summaries means one cannot definitively quantify budget shortfalls or savings attributable to the policy changes from the available sources.
4. State variation and the hidden tradeoffs
Where states did not fully repeal taxation they often narrowed the base through age or income thresholds, producing targeted benefits for lower‑ and middle‑income retirees; analyses linked to federal policy debates note that targeted senior deductions can deliver more concentrated relief to middle‑income taxpayers than blanket exemptions, and that temporary federal measures further complicate long‑run fiscal arithmetic [8] [4]. Reporting also surfaces an implicit agenda: tax cuts are politically popular and often advanced in years with one‑time revenue windfalls, so the timing of these changes — after CARES and American Rescue Plan inflows — suggests leaders used temporary resources to lock in permanent tax preferences, shifting fiscal risk to future budgets [4].
5. Bottom line and limits of reporting
The clear, sourced takeaway is that Kansas, Missouri and Nebraska eliminated state taxation of Social Security benefits in the recent post‑2020 period and West Virginia is phasing out its tax by 2026, while other states pursued partial exemptions or deductions [1] [2] [4]. The reporting links those cuts to an environment of elevated federal aid that temporarily softened budget constraints, but the material lacks consistent, state‑by‑state revenue accounting to show precisely how much each repeal cost, what offsets were enacted, or what long‑term budget pressures will result — gaps that warrant follow‑up with state budget offices and independent fiscal analyses [4] [5].