Social Security Taxed by State: Complete Guide, Map & 2026 Tax Rates

Navigating the landscape of retirement taxes can be a complex endeavor, especially as state laws regarding Social Security benefits continue to shift. For many years, a significant number of states taxed these benefits, often following the federal government’s lead. However, a growing trend toward “retiree-friendly” tax policies has seen several states phase out or completely eliminate these taxes.¹ As we look toward the 2026 tax year, the number of states that still impose a tax on Social Security is reaching a historic low, providing much-needed relief to seniors on fixed incomes.

The Changing Landscape of State Taxation in 2026

The most significant update for the 2026 tax season is the official removal of West Virginia from the list of states that tax Social Security. Following a multi-year phase-out plan, West Virginia has joined the majority of the country in offering a full exemption for these benefits. This shift highlights a broader national movement where state legislatures are recognizing that taxing Social Security can be a double burden for residents who have already paid into the system throughout their working lives. Currently, 42 states plus the District of Columbia do not tax Social Security benefits, leaving only a small handful of locations where retirees must still account for this expense.

States Still Taxing Social Security in 2026

Despite the trend toward elimination, eight states will continue to tax at least a portion of Social Security benefits in 2026.⁴ It is important to note that even in these states, the tax is rarely applied to everyone. Most of these jurisdictions utilize “cliffs” or income thresholds, meaning only middle-to-high-income earners see a tax bill on their benefits.⁵ For instance, states like Colorado and New Mexico have implemented very generous exemptions that effectively shield low- and moderate-income retirees from paying anything at all.⁶ Understanding the specific adjusted gross income (AGI) limits in these states is the key to accurate financial planning.

Federal Tax Rules vs. State Tax Rules

While state taxes are disappearing, federal taxes on Social Security remain a reality for many. The IRS uses a metric called “combined income,” which is the sum of your adjusted gross income, nontaxable interest, and half of your Social Security benefits.⁷ If this total exceeds $25,000 for individuals or $32,000 for couples, up to 50% of benefits may be taxable. For those with even higher incomes—over $34,000 for individuals or $44,000 for couples—up to 85% of benefits can be subject to federal income tax.⁸ Because state rules often differ from these federal formulas, retirees frequently find themselves owing the IRS while owing their state nothing.

Understanding the 2026 Payroll Tax Rates

While retirees focus on how their benefits are taxed, current workers must keep an eye on the 2026 Social Security payroll tax rates. For the 2026 tax year, the Social Security (OASDI) tax rate remains steady at 6.2% for employees and 6.2% for employers.⁹ However, the “taxable maximum”—the cap on earnings subject to this tax—is increasing to $184,500.¹⁰ This means that any income earned above this threshold is not subject to the Social Security payroll tax.¹¹ For self-employed individuals, the responsibility remains to pay both the employer and employee portions, totaling 12.4% up to that same wage limit.

Recent Success Stories in Tax Reform

The move toward zero state tax on Social Security has been rapid. In just the last two years, states like Nebraska, Missouri, and Kansas have all successfully moved to fully exempt benefits.¹³ These changes were driven by a desire to remain competitive and attract retirees who might otherwise move to “tax-haven” states like Florida or Nevada. For residents in the remaining eight taxing states, there is ongoing legislative pressure to follow suit. Monitoring local legislative sessions in early 2026 is recommended, as many governors have signaled a desire to further increase exemption limits or eliminate the tax entirely to combat the effects of inflation on seniors.

Strategic Planning for Retirees

If you live in one of the states that still taxes Social Security, there are ways to minimize your liability. Utilizing the new “Senior Bonus Deduction” available under recent federal tax adjustments can help lower your overall taxable income.¹⁴ Additionally, many states allow you to subtract specific retirement income if you have reached Full Retirement Age (FRA). By timing your withdrawals from traditional IRAs or 401(k) plans, you may be able to keep your total income below the state’s threshold, ensuring that your Social Security checks remain completely untaxed at the state level.

SOURCE

South Africa R1051 Pension Top-Up: What Grant Beneficiaries Need to Know

FAQs

Q1: Which states will stop taxing Social Security in 2026?

West Virginia is the primary state completing its phase-out in 2026, meaning benefits will be 100% exempt for the first time.

Q2: What is the Social Security wage base for 2026?

The maximum taxable earnings for Social Security will increase to $184,500 in 2026, up from $176,100 in 2025.

Q3: Do I have to pay state tax on Social Security if I live in Florida or Texas?

No. Florida, Texas, and other states with no state income tax do not tax Social Security benefits under any circumstances.

disclaimer

The content is intended for informational purposes only. You can check the official sources; our aim is to provide accurate information to all users.