Does Nebraska Tax Social Security? The Complete State-by-State Breakdown for Retirees

As of 2025, Nebraska residents have gained significant financial relief—the state no longer imposes income taxes on Social Security benefits. This change, which took effect on January 1st, is transforming retirement finances for thousands across the nation. But Nebraska’s move is just one piece of a larger puzzle in how American states handle Social Security taxation, a landscape that varies dramatically from one state to another.

Nebraska and Missouri Join the Social Security Tax-Exempt Club

Starting in the new year, both Missouri and Nebraska eliminated state income taxes on Social Security benefits, providing combined annual savings estimated at $326 million. In Missouri, beneficiaries are expected to save approximately $309 million annually, while Nebraska residents will collectively benefit from about $17 million in yearly relief. These tax changes represent a meaningful victory for retirees struggling with inflation and rising living expenses.

Previously, Nebraska residents who received Social Security faced significant tax burdens. Beneficiaries with incomes exceeding $45,790 (or $61,760 for married couples filing jointly) paid state income taxes ranging from 2.46% to 6.84% on their benefits. Meanwhile, Missouri retirees aged 62 and older with gross income of $85,000 or more (or $100,000-plus for married couples) were taxed at rates up to 4.95% on their Social Security income.

The policy shift acknowledges a fundamental reality: the average monthly Social Security benefit in 2024 reached $1,847.30, translating to just over $22,000 annually—a modest sum that doesn’t stretch as far as it once did. For many seniors, even small tax savings prove crucial to maintaining financial stability.

Understanding How Federal Social Security Taxation Works

Before exploring state-level policies, it’s important to understand federal taxation of Social Security. The federal government calculates taxation based on “combined income” (provisional income), which equals your gross income plus half of your Social Security benefits. Under federal rules, recipients may owe income tax on up to 85% of their benefits.

However, not all Social Security recipients face federal taxation. Single filers with combined income below $25,000 and married couples filing jointly with combined income under $32,000 are completely exempt from federal Social Security taxes. Those with higher combined incomes face progressive taxation on their benefits.

Note that these rules apply only to regular Social Security benefits. Supplemental Security Income (SSI)—benefits intended for individuals 65 and older, plus adults and children with disabilities or vision impairment—remains tax-free at both federal and state levels.

Which States Still Tax Social Security Benefits?

With Nebraska and Missouri now exempting Social Security from state taxation, only ten states continue to impose income taxes on residents’ benefits. These states are Colorado, Connecticut, Kansas, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia. While each state’s approach differs, most offer exemptions or deductions based on age thresholds or income levels.

Several states are actively considering legislation that would expand these exemptions even further, recognizing the financial squeeze facing senior citizens. These deductions reduce taxable income, thereby lowering the overall tax burden.

State-by-State Policy Breakdown

Colorado

Colorado has increasingly moved toward taxing Social Security leniently. Before 2022, retirees aged 65 and older could only deduct up to $24,000 in total retirement income, including Social Security payments. However, a 2021 legislative change eliminated that cap, allowing seniors 65 and older to fully deduct Social Security benefits from state income.

Retirees between ages 55 and 64 face stricter rules—they may deduct only up to $20,000 in retirement income, with anything exceeding that amount taxed at Colorado’s 4.4% state income tax rate.

Connecticut

Connecticut’s Social Security taxation depends on adjusted gross income (AGI). Single filers with AGI below $75,000 and married couples with AGI under $100,000 receive complete tax exemption on their Social Security benefits. For higher-income retirees, 75% of benefits remain tax-exempt while 25% becomes taxable.

Residents whose income exceeds these thresholds but don’t qualify for the partial exemption face Connecticut’s standard income tax rates, which range from 3% to nearly 7%.

Kansas

Kansas operates a straightforward income threshold system. Retirees with AGI of $75,000 or less, regardless of filing status, pay no state taxes on Social Security benefits. Those exceeding this income limit face taxation on Social Security at the same rate applied to other income types, ranging from 3.1% to 5.7%.

Minnesota

Minnesota considered comprehensive Social Security tax repeal in 2023 but settled for expanded exemptions instead. Currently, single retirees with incomes up to $78,000 and married couples earning up to $100,000 may fully deduct Social Security benefits.

For higher-income retirees, Minnesota’s Social Security Subtraction rule provides partial relief. For the 2024 tax year, maximum subtractions ranged from $2,725 to $5,840 depending on filing status. The deduction phases out as income increases, eventually becoming zero. Minnesota’s income tax rates span 5.35% to 9.85%, among the nation’s highest.

Montana

Montana mirrors federal Social Security taxation rules. Single retirees with income below $25,000 and married couples earning under $32,000 escape state Social Security taxation entirely. Those with higher incomes face state tax rates ranging from 1% to 6% (declining to 5.9% in the following tax year).

Montana uses custom calculations to determine taxable benefits; according to House Bill 526’s fiscal analysis, taxpayers whose total income consists solely of Social Security payments could exclude up to $50,000 from taxation. The state is considering legislation that would repeal Social Security taxation entirely, though recent passage prospects appear uncertain.

New Mexico

New Mexico expanded Social Security deductions significantly through 2022 legislation. Single residents with AGI below $100,000 and married couples earning under $150,000 may fully deduct Social Security income. Retirees exceeding these thresholds face income tax from 1.7% to 5.9% on their benefits.

Rhode Island

Rhode Island requires retirees to reach the Social Security Administration’s full retirement age (67, depending on birth year) to qualify for tax exemptions. Additionally, individuals must maintain AGI under $95,800 (or under $119,750 for couples). Retirees who don’t meet these requirements pay between 3.75% and 5.9% in state income tax, including on Social Security portions.

Utah

Utah applies the same federal taxation calculations to determine how much of residents’ Social Security income becomes taxable at the state’s 4.65% rate. However, Utah significantly softened this burden through tax credits expanded in 2023. Single filers with income of $45,000 or less received full tax credits for Social Security income, as did married couples filing jointly and heads of households reporting income of $75,000 or less.

Higher-income retirees receive partial relief; the credit decreases by 25 cents for every dollar of income exceeding the thresholds, providing gradual phase-out rather than cliff-edge elimination.

Vermont

Vermont lawmakers enhanced Social Security tax relief in 2022. Single filers with AGI of $50,000 or less enjoy complete tax exemption on benefits. Those with AGI between $50,000 and $60,000 receive partial exemptions. Married couples filing jointly benefit from full exemption at $65,000 AGI, with partial exemption extending to $75,000.

Residents with AGI exceeding these limits face Vermont’s standard income tax rates of 3.35% to 8.75% applied to their Social Security benefits.

West Virginia

West Virginia implemented a gradual phase-out beginning in 2020. Married couples earning $100,000 or less and singles earning $50,000 or less became exempt from Social Security taxation. By 2022, these exemptions solidified completely for eligible retirees. Those with AGI exceeding thresholds pay income tax ranging from 3% to 6.5% on their benefits.

Planning Your Retirement Across State Lines

The question “Does Nebraska tax Social Security?” now carries a definitively positive answer for retirees: it no longer does. But this answer masks the complexity underlying American retirement taxation. Whether you’re retired in Nebraska, considering retirement, or simply managing existing benefits, understanding your state’s Social Security tax rules proves essential to maximizing financial stability.

As states continue reconsidering these policies—driven by recognition that seniors struggle with inflation and shrinking purchasing power—the landscape may shift further. For now, retirees in tax-exempt states enjoy significant advantages, while those in states maintaining taxation face meaningful planning decisions about timing, income management, and potential relocation strategies.