If you’re receiving Social Security Disability Insurance (SSDI) benefits and think your payments are safe from taxes — think again. While most states leave SSDI alone, nine states are still taxing these crucial benefits, and many recipients are getting blindsided this tax season. From Colorado to Vermont, these state tax policies are quietly shrinking disability checks, and unless you’re paying attention, you could be one of the next recipients facing an unexpected bill.
Let’s break down what’s happening, which states are affected, and what you can do to protect your income.
What’s Going On: Why Are Some States Taxing SSDI?
At the federal level, SSDI benefits can be taxed — but only if your total income exceeds certain thresholds. However, most states choose not to tax SSDI at all. Still, a handful of states take a different approach, including disability benefits as part of your taxable income. The reasons vary — some states use it as a way to increase revenue, others apply broader tax rules that include various forms of Social Security.
Here’s the important part: these taxes are not new, but because rules change often and many recipients assume their SSDI is tax-exempt, they’re caught off guard when they owe money at the state level.
The 9 States Still Taxing SSDI in 2025
These are the states that currently tax SSDI benefits in some form:
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Colorado
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Connecticut
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Minnesota
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Montana
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New Mexico
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Rhode Island
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Utah
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Vermont
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West Virginia
Each state sets its own income thresholds, exemptions, and deductions, meaning the exact impact on your benefits depends on your total income, filing status, and age.
For example:
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Connecticut allows most people to exempt up to 75% of their Social Security income if they earn below a certain limit.
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West Virginia is phasing out its Social Security tax altogether — allowing a 65% exemption in 2025 and going to 100% by 2026.
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Colorado offers special deductions for residents over 65, but younger SSDI recipients may still owe taxes.
What SSDI Recipients Can Do Right Now
If you live in one of these nine states, it’s critical to stay informed and take action:
Check your state’s tax rules — Go directly to your state’s Department of Revenue website to see if SSDI income is taxable for your bracket.
Talk to a tax advisor — An accountant familiar with SSDI can help you minimize what you owe and ensure you claim every deduction available.
Keep records of your income — If you receive additional income (such as pensions or part-time work), this could push you into a taxable bracket.
Watch for legislative updates — West Virginia is already planning to eliminate its SSDI tax in 2026. Other states could follow.
The Bigger Picture: Why This Matters
For millions of SSDI recipients, every dollar counts. The cost of living is rising, and surprise tax bills can seriously impact those living on fixed incomes. While the federal government offers some protections, your state’s tax policies could undo that relief, especially if you’re not prepared.
It’s also a reminder that tax policies can be deeply local — and staying informed isn’t just helpful, it’s essential. As public pressure mounts, there’s hope that more states will move to shield SSDI recipients from state taxes entirely — but until then, awareness and preparation are your best defense.
