Social Security taxes in 2026: 8 states taxing benefits, federal tax limits and retirees' costs

Retirees in the United States face varying tax implications on their Social Security benefits depending on their state of residence and total yearly income. While most states do not tax these payments, the federal government can tax up to 85% of benefits if a retiree's income surpasses specific limits. However, not all states follow this federal rule; eight states still tax Social Security benefits in 2026: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont.

The IRS calculates the taxability of Social Security benefits through a combined income figure that includes federal tax rules based on whether an individual or married couple files taxes. For single filers, benefits are not taxed if combined income is $25,000 or less. Between $25,001 and $34,000, up to 50% may be taxable, and over $34,000, up to 85% can be taxed.

Married couples filing jointly have similar thresholds: not taxed at $32,000 or less, up to 50% taxed between $32,001 and $44,000, and up to 85% taxed above $44,000. Married individuals living apart from their spouse also follow the $25,000 single filer exemption. The 2025 One Big Beautiful Bill Act did not eliminate federal taxes on Social Security benefits or alter the combined income limits established since 1994, but it did introduce a $6,000 deduction for those aged 65 and older, effective for tax years 2025 through 2028.

This deduction reduces the share of seniors effectively paying no federal taxes on their benefits from around 64% to 88%.