One state just stopped taxing Social Security altogether — and it’s not who you’d expect

West Virginia drops its Social Security tax

West Virginia retirees just caught a break. As of Jan. 1, 2026, the state no longer collects income tax on Social Security benefits, no matter how much you earn.

The change wraps up a three-year effort to phase out the tax completely. Federal taxes on Social Security still apply depending on income, so it’s not a total free pass.

But for the more than 470,000 West Virginians who receive some form of Social Security, it’s real money back in their pockets.

Lawmakers phased the tax out over three years

This didn’t happen overnight. Then-Gov. Jim Justice signed House Bill 4880 in March 2024, setting up a three-step phase-out.

The state cut the tax by 35% in 2024, then by 65% in 2025. Now in 2026, the tax drops to zero.

The bill sailed through the House of Delegates with a unanimous vote and drew support from both parties in both chambers. Lawmakers designed the gradual approach to ease the hit on the state budget.

Lower earners already had an exemption

Most West Virginia retirees actually stopped paying this tax years ago. A 2019 law, House Bill 2001, started exempting Social Security benefits for lower-income residents.

By 2022, single filers earning under $50,000 and joint filers under $100,000 owed nothing on their benefits at the state level.

The 2024 law picked up where that left off, targeting the higher-income households still on the hook. The governor’s office estimated about 50,000 more senior households would benefit.

Retirees won’t see savings right away

Here’s the catch: the full exemption covers income earned in tax year 2026. That means retirees won’t feel the full benefit until they file state returns in early 2027.

It’s not instant relief. That said, people who had state taxes withheld on their Social Security in 2024 and 2025 already saw partial savings when they filed those returns.

The phase-out gave people a little more back each year on the way to full elimination.

Savings depend on income and tax bracket

How much retirees save varies quite a bit. It depends on income level and how much of their Social Security is taxable at the federal level.

The state estimates the full elimination returns about $37 million a year to taxpayers overall. Supporters say some seniors could save the equivalent of an extra month’s worth of groceries.

The biggest savings go to higher-income retirees, since they were the ones still paying after the 2019 law shielded lower earners. The West Virginia Tax Division has details on how the phase-out schedule worked.

Supporters called it double taxation

Lawmakers who pushed for the change had a simple argument: Social Security benefits already get taxed at the federal level, so why should the state tax them again?

West Virginia had been one of a shrinking number of states still doing so, and every neighboring state had already dropped its Social Security tax.

AARP West Virginia called eliminating the tax a top priority for years, saying the state was at a disadvantage compared to its neighbors when it came to keeping older residents.

Lawmakers want retirees to stay put

The tax cut was about more than just savings. Legislators said they wanted to stop retirees from packing up and moving to states with friendlier tax rules.

States like Florida and Texas have no state income tax at all, and they attract retirees by the thousands. Keeping older residents in West Virginia supports local economies, lawmakers argued.

Supporters estimated that every dollar kept in the state generates about $1.50 in economic activity through local spending.

The state gives up $37 million a year

There’s a cost to this. West Virginia expects to lose about $37 million in annual revenue from the full elimination.

Lawmakers who backed the bill said long-term gains from keeping residents and boosting consumer spending would make up the difference. But not everyone agreed.

The WV Center on Budget and Policy warned that years of tax cuts could add up and force tough budget choices down the road.

The phase-out approach helped spread the revenue impact over three years instead of taking the full hit at once.

Other states followed the same path

West Virginia isn’t alone in this move. The state now joins 42 states plus Washington, D.C., that don’t tax Social Security benefits in 2026.

Kansas, Missouri, and Nebraska all ended their Social Security taxes starting with the 2024 tax year. Back in 2020, 13 states still taxed benefits.

That number has now dropped to just eight.

Groups like AARP keep pushing for elimination in those remaining states, and the trend shows no signs of slowing down.

Eight states still tax Social Security

Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont still tax Social Security benefits to some degree.

Most of these states offer income-based exemptions that protect lower-income retirees from the tax. Vermont and Utah recently raised their income thresholds, shielding more residents.

Lawmakers in several of these states introduced bills in 2025 to end or limit the tax, though many of those efforts stalled. AARP and other advocacy groups continue to push for full elimination.

Filing is automatic for 2026 returns

West Virginia retirees don’t need to do anything special. The state exemption kicks in automatically when they file a 2026 state tax return.

Federal taxes on Social Security still apply based on combined income and filing status, and up to 85% of benefits can still be taxed at the federal level for higher earners.

Retirees with questions can call the West Virginia Tax Division at 1-800-982-8297 for help sorting out what they owe.

Years of effort led to full exemption

Getting here took time. The push to eliminate Social Security taxation in West Virginia stretched across multiple governors and legislative sessions.

The 2019 law was the first big step, covering most residents but leaving higher earners on the hook. The 2024 law finished the job by removing the income cap entirely.

West Virginia now lines up with the majority of states that fully exempt Social Security benefits from state income tax.

This article was created with AI assistance and human editing.

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