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By Aliss Higham
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Lawmakers in two states are pushing to change rules around the taxation of Social Security benefits.
Why It Matters
Tens of millions of Americans receive Social Security benefits every month, with some 40 percent of them paying federal income taxes on their entitlements. Only nine states have a state-level levy on retirement incomes: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia.
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What To Know
Social Security claimants in Vermont and Utah could end up with some extra cash in their pockets if two separate proposals become law.
In Utah, Governor Spencer Cox has proposed an elimination of state taxes on Social Security income. Currently, taxes start at $45,000 in income for single filers and $75,000 for joint filers.
The proposal will need to be reviewed, along with the rest of Cox's budget, before it can become law. The Utah Legislature will determine the state's budget for the upcoming fiscal year, which begins in July. Lawmakers are set to convene for the 2025 general session on January 21, and the budget will be finalized on March 7.
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Similar moves are being made in Vermont. A throng of bipartisan lawmakers wants to raise the threshold at which Social Security taxes apply, with the view to eventually eliminating it altogether.
As it stands, Vermonters with incomes under $50,000 per year and couples with incomes under $65,000 per year are not currently required to pay state taxes on their Social Security payments right now—around half of the 161,841 Social Security recipients in Vermont, according to Vermont Public.
The bill has been put forward by Democrat Representative Dan Noyes and Republican Representative Jim Harrison.
Noyes told Newsweek the bill "proposes to phase out Vermont income tax over a period of eight years, with the first round increasing the current exemption by $15,000, the second year $12,000 and $10,000 for each subsequent year."
Noyes said the proposed change is about "making sure they have the income to be able to provide for themselves" and allowing recipients "to keep more of the Social Security to be able to live on."
Harrison told Newsweek that it is "too early to know how the legislation will fare, but we share a desire to help all seniors in Vermont."
What People Are Saying
Utah Governor Spencer Cox said in his proposed budget: "By implementing this tax cut, Utah will demonstrate its dedication to the well-being of older adults and foster a more supportive environment for those who have contributed to the state's growth and prosperity."
What's Next
Nationwide changes to Social Security taxes could be on the way soon, as President-elect Donald Trump has also pledged to nix all federal taxes on Social Security income during his second administration, which begins on Monday, January 20. However, this will not impact state specific income taxes, which are separate from federal levies.
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