States That May Cut Taxes on Social Security Income (SSI)

States That May Cut Taxes

There are states that may cut taxes this year. As state legislative sessions kick into high gear this year, many states are reporting budget surpluses, and some governors and lawmakers are looking to offer targeted tax relief, including to older adults . AARP is ramping up advocacy efforts to reduce the tax burden on older residents, and at least a dozen states still tax Social Security benefits.

There are states that may cut on their Social Security Income Taxes (Photo: Vecteezy)

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Here are four states that are considering changes to Social Security taxes this year

  • Kansas

Kansas has two bills under consideration this session that would give older adults some tax relief by raising the income threshold for Social Security tax exemption One is HB 2107, which would expand the full exemption to beneficiaries with AGIs up to $100,000. The other is HB 2109, which would maintain the $75,000 ceiling for full exemption but allow beneficiaries with incomes up to $100,000 to subtract some of their benefits from the tax equation.

  • Minnesota

Similarly, Minnesota is expected to address the issue of Social Security taxation after the collapse of a bipartisan budget compromise last year. Governor Tim Walz has proposed cutting taxes on benefits, while several legislators have filed bills to eliminate them.

  • Missouri

In Missouri, there is progress in extending the full deduction to all beneficiaries after failing to do so in recent years. After a special session in September 2022 to enact tax cuts, AARP lobbied to add provisions targeting tax relief for older Missourians, including the Social Security exemption and broader eligibility for the “Circuit Breaker,” a state property-tax credit.

  • Utah

Finally, Utah offers partial tax credits on a sliding scale to beneficiaries with higher incomes, but AARP Utah is calling for the full removal of the state tax on benefits. The UTAH AARP has collected over 4,500 signatures for an online petition calling on lawmakers to end the tax, and a bill before the state legislature would raise exemption thresholds or eliminate income as a factor in determining taxation on benefits.

Several states with budget surpluses are making progress in extending exemptions and deductions to all beneficiaries while some are looking to eliminate the Social Security tax altogether. The issue is gaining traction in state legislatures, and it remains to be seen how much tax relief will be provided. However, with AARP leading the charge, the outlook is positive for older adults looking for relief from Social Security taxes.

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