In certain states, Social Security benefits are subject to income taxes. The rationale behind this stems from state tax laws, which may include provisions that treat Social Security income as taxable. The decision to tax Social Security benefits varies among states, and factors such as overall income levels and specific state tax policies contribute to the variation in tax treatment across the United States.
Additional tax relief may be in store for a specific demographic in West Virginia, raising the pivotal question: Will they receive their entire refunds in a single disbursement?
One State Is Considering to Reduce Income Taxes on Social Security Payments
Distinguishing itself from most states, West Virginia currently imposes an income tax on individuals receiving Social Security benefits. The state’s legislature is now on the brink of potentially abolishing this income tax on Social Security payments. As of now, approximately 50,000 retirees in the Mountain State are subjected to these annual taxes on their Social Security income.
Social Security tax exemptions have been enacted in 40 states, encompassing all five neighboring states. While there is a collective desire, notably expressed by groups like the AARP, to completely eliminate the tax this year, leadership is adopting a more cautious approach. The current strategy involves a phased reduction, aiming to gradually diminish the tax to zero over the course of the next three years.
“The House Finance and the rest of this chamber has always worked to be fiscally prudent. It’s a three-year phase-in. We figured that was going to be the most fiscally prudent way to do this,” said Del. John Hardy, (R) Berkeley, the Finance Committee Vice-Chairman.
“So, I prefer that we do it now. And I truly believe we have the dollars available to us to do so now. We’re already through the first phase of our personal income tax reductions. Those are all factored into the governor’s introduced budget. And interestingly enough, the state is growing,” said Del. Daniel Linville, (R) Cabell.
“This legislature has been really good about putting people’s money back in their pocket. This is another good step in that direction. And do you know what happens when you put people’s money back in their own pockets? They spend it,” said Gaylene Miller, State Director of AARP West Virginia.
Only 10 States Tax Social Security Incomes
For the year 2024, Social Security benefits will be subject to taxation in only 10 states: Colorado, Connecticut, Kansas, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia. Within each of these states, distinct tax provisions are in place, offering potential deductions for individuals based on specific income thresholds or age criteria. This results in a diverse and unique tax environment within each jurisdiction.
In 2024, the majority of states, including Washington, D.C., will not impose taxes on Social Security benefits. These states encompass Alabama, Alaska, Arizona, Arkansas, California, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Nebraska, Nevada, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Virginia, Washington, Wisconsin, and Wyoming.