Is your state cutting Social Security payments? Here’s how you can claim some extra cash back
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Navigating Social Security can sometimes feel like trying to solve a puzzle where the pieces keep changing.
For many retirees, these benefits are a crucial part of their financial stability, so any reduction in payments can be concerning.
Recently, it was revealed that residents in certain states may be receiving less than expected due to state tax policies.
But before you worry about losing out on your hard-earned money, let’s take a closer look at why this is happening and—more importantly—what you can do about it.
In 2025, an estimated 69 million Americans will receive monthly Social Security payments, providing a financial foundation for retirees across the country.
However, in nine states, certain tax policies may reduce the amount retirees actually take home.
The states affected are Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia.
Each of these states has its own rules regarding how Social Security benefits are taxed.
For example:
Even if you live in one of the 41 states that don’t tax Social Security, the IRS still has its own rules.
The federal government calculates taxation based on a combination of your adjusted gross income, half of your annual Social Security benefits, and any nontaxable interest.
Here’s a quick breakdown of when Social Security benefits may be taxable at the federal level:
With Social Security always a topic of national discussion, it’s smart to explore other ways to support your retirement income. Here are a couple of strategies that could help:
If you live in one of the 41 states that don’t tax Social Security, your benefits may be unaffected.
Even if you reside in one of the nine states that do, there are often deductions and credits available that can help offset these taxes.
Some states are also considering additional benefits for retirees, potentially extending the longevity of Social Security payouts.
And if you haven’t started claiming your benefits yet, financial experts often recommend waiting past age 62 to maximize your monthly payments.
No matter where you live, understanding how Social Security taxes impact your benefits is key to making informed financial decisions.
By staying informed and exploring additional retirement strategies, you can take control of your financial future and ensure a more comfortable retirement.
Read next: Get $2,000: Discover how the government's paying for your water heater upgrade!
Have you noticed a difference in your Social Security payments due to state taxes? What strategies have helped you manage your retirement income? Share your experiences and insights in the comments below—we’d love to hear from you!
For many retirees, these benefits are a crucial part of their financial stability, so any reduction in payments can be concerning.
Recently, it was revealed that residents in certain states may be receiving less than expected due to state tax policies.
But before you worry about losing out on your hard-earned money, let’s take a closer look at why this is happening and—more importantly—what you can do about it.
Understanding your Social Security benefits can help you make the most of your retirement income. Image Source: Pexels / Markus Winkler.
The Social Security squeeze: What’s going on?
In 2025, an estimated 69 million Americans will receive monthly Social Security payments, providing a financial foundation for retirees across the country.
However, in nine states, certain tax policies may reduce the amount retirees actually take home.
The states affected are Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia.
Each of these states has its own rules regarding how Social Security benefits are taxed.
For example:
- Utah applies a flat 4.55% income tax rate on Social Security benefits.
- Connecticut allows residents to deduct all federally taxable Social Security income if they earn below a certain threshold.
- Colorado permits residents over 65 to deduct all federally taxed Social Security benefits, while those younger than 65 can deduct up to $20,000.
Also read: Is your state taking a bite out of your social security? Find out now!
Federal vs. state: Understanding the tax differences
Even if you live in one of the 41 states that don’t tax Social Security, the IRS still has its own rules.
The federal government calculates taxation based on a combination of your adjusted gross income, half of your annual Social Security benefits, and any nontaxable interest.
Here’s a quick breakdown of when Social Security benefits may be taxable at the federal level:
- If you’re single and your income is less than $25,000, you likely won’t pay federal taxes on your benefits.
- If you’re married and file jointly with an income under $32,000, your benefits are also tax-free.
- Single filers earning $25,000–$34,000 and joint filers making $32,000–$44,000 may have to pay taxes on up to 50% of their benefits.
- If your income exceeds these thresholds, up to 85% of your Social Security benefits could be taxable.
Knowing the IRS rules on Social Security taxes can help you keep more of your hard-earned benefits. Image Source: Pexels / Kampus Production.
How to supplement your Social Security income
With Social Security always a topic of national discussion, it’s smart to explore other ways to support your retirement income. Here are a couple of strategies that could help:
- 401(k) plans – These employer-sponsored retirement accounts allow tax-deferred contributions, and many employers match contributions, which can significantly grow your savings.
- IRAs (Individual Retirement Accounts) – Traditional IRAs allow tax-deductible contributions and tax-free growth until withdrawal, making them a valuable tool for retirement planning.
Also read: Is your state on the map? What you need to know about recent social security office shutdowns.
The silver lining
If you live in one of the 41 states that don’t tax Social Security, your benefits may be unaffected.
Even if you reside in one of the nine states that do, there are often deductions and credits available that can help offset these taxes.
Some states are also considering additional benefits for retirees, potentially extending the longevity of Social Security payouts.
And if you haven’t started claiming your benefits yet, financial experts often recommend waiting past age 62 to maximize your monthly payments.
No matter where you live, understanding how Social Security taxes impact your benefits is key to making informed financial decisions.
By staying informed and exploring additional retirement strategies, you can take control of your financial future and ensure a more comfortable retirement.
Read next: Get $2,000: Discover how the government's paying for your water heater upgrade!
Have you noticed a difference in your Social Security payments due to state taxes? What strategies have helped you manage your retirement income? Share your experiences and insights in the comments below—we’d love to hear from you!
