New tax laws for US citizens. In 2026, millions of retirees in the United States will see a change in their income following tax reforms across much of the country. With the full implementation of new state laws and the enactment of federal aid under the “One Big Beautiful Bill” (OBBBA), beneficiaries will see changes in their monthly income. Among the states that will increase Social Security benefits are Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont.
There are several reasons why states make these changes
Regarding this issue, some states tax this federal benefit, which could significantly impact your retirement and long-term financial planning. In fact, seven U.S. states still tax Social Security benefits, either partially or entirely, and this directly affects retirees. There are several reasons why states make these changes. These include conserving tax revenue, treating these payments as part of total income, and targeting tax relief only to those with the fewest resources.
It is important for citizens to consider the specific conditions of their circumstances
In any case, there are specific details. For example, in states like Colorado, these benefits are taxed partially with broad exemptions, especially for seniors. The most notable change occurred in West Virginia, which completed its phase-out process on January 1, 2026, completely exempting these benefits from state taxes. In Colorado, the general state income tax rate is around 4.4% or 4.5%. Furthermore, in Colorado, residents between the ages of 55 and 64 can deduct approximately $20,000 to $24,000 of retirement income (including Social Security) from their taxable income, reducing or even eliminating the tax on those payments. It is important for citizens to consider the specific conditions of their circumstances, as everything can vary from case to case.
In Connecticut, for example, Social Security benefits are taxed, but only partially
It’s important to remember that other states and Washington, D.C., do not tax Social Security benefits. At the federal level, the OBBBA (enacted into law in July 2025) introduces additional benefits for taxpayers over 65 that will be in effect until 2028. On the other hand, it’s important to be aware of the changes that are coming, and they are not implemented uniformly across all states. In Connecticut, Social Security benefits are taxed, but only partially, as it applies to those above certain income levels; however, for most low- and middle-income retirees, the state tax rate is zero. And in Utah, a state income tax rate of approximately 4.85% is applied to income, including taxable Social Security benefits.
Married couples, provided both are over age 65, can claim up to $46,700 on their joint return
And continuing along these lines, for the current year, the total amounts a retiree can deduct (combining the standard deduction, the additional amount for age, and the new OBBBA deduction) are measured among single filers over age 65, who can claim a total deduction of up to $23,750. Married couples, provided both are over age 65, can claim up to $46,700 on their joint return. In Utah, for example, retirees with low or moderate incomes pay little or no state income tax on Social Security.
In Vermont, if you are an individual taxpayer and your adjusted gross income (AGI) is $45,000 or less
Finally, although each state handles it differently, up to 50% of your benefits may be subject to tax if your combined income is between $25,000 and $34,000 (if you are single) or between $32,000 and $44,000 (if you are a couple). For example, in Vermont, if you are an individual taxpayer and your adjusted gross income (AGI) is $45,000 or less, you are exempt from paying state income tax on your Social Security benefits. However, if your AGI is between $45,001 and $54,999, you receive a partial exemption.