Planning where you spend your golden years requires careful consideration, especially for retirees living on a fixed budget. And while warm weather and walkable towns is often high on people’s lists when they are planning a move, making sure you’re relocating to a state with favorable tax laws is probably your biggest consideration.
That’s because living in some states can actually reduce your after-tax retirement earnings, making your fixed income feel that much smaller after Uncle Sam gets his cut. Keep reading to find out which states are still demanding their cut of your retirement, and exactly how much you stand to lose when you call these places home.
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While many states are moving away from the idea of taxing their oldest residents, there are still eight that require you to pay a portion of your Social Security and retirement earnings back to the government. In 2026, Money magazine says the states still collecting income taxes on Social Security payments include:
Colorado
Connecticut
Minnesota
Montana
New Mexico
Rhode Island
Utah
Vermont
Related: This Genius Simple Move Could Give You Bigger Social Security Checks—for Life
While the rest of the states in the country have largely moved away from taxing certain income, these eight states use varying income thresholds to determine just how much you’ll have to pay. Of course, those numbers can change dramatically based on individual circumstances, just as much as zip codes, so it’s important to look into what your tax liability could be using your personal earnings figures.
Now, let’s take a look at just how much of your Social Security you could be giving back each month. For example, Colorado’s Department of Revenue says that taxpayers under age 65 on the last day of the tax year can deduct a certain amount from their taxable earnings, including up to $20,000 of their taxable annuity or pension income, whichever is lower. For those over 65, the figure jumps to $24,000.
Connecticut goes a different route, allowing people to deduct 100 percent of their Social Security benefits if their combined household income is less than $100,000 for joint filers and $75,000 for single filers. Those figures are similar for pension and annuity income; there are some caveats about how those limits are used at scale when your earnings exceed the maximum.
Minnesota retirees have a similar structure, but the income levels are slightly higher at $108,320 for married taxpayers and $84,490 for single filers. In Montana, the Department of Revenue allows you to deduct a portion of your Social Security from your taxable income, and those ages 65 and older can subtract up to $5,500.
Related: Experts Warn That the Latest Inflation Surge Could Change Everything for 2027 Retirement Plans and Social Security
In New Mexico, retirees are allowed to keep 100 percent of their Social Security earnings when they make less than $150,000 for married filers and $100,000 for singles (married couples filing separately are capped at $75,000).
Rhode Island retirees can exempt up to $20,000 of retirement income ($40,000 for couples) once they reach full retirement age, according to the state. And in Utah, those earning up to $90,000 will be exempt from paying tax on Social Security. In Vermont, though, those thresholds are much smaller, and in order to keep 100 percent of your Social Security benefits, you’ll need to make less than $32,000 a year for couples or $25,000 a year for singles.
While nobody likes to hear that their retirement benefits are shrinking, it’s worth noting that the 2026 Social Security benefits are going to increase thanks to the cost-of-living adjustment (COLA) announced by the Social Security Administration (SSA). According to the website, W2 earners will see a 7.65 percent increase, while self-employed earners will see a 15.30 percent increase. Meanwhile, those receiving Supplemental Security Income (SSI) will get just a 2.8 percent increase.
This story was originally published by Parade on Apr 11, 2026, where it first appeared in the Life section. Add Parade as a Preferred Source by clicking here.
