Every month, tens of millions of Americans rely on Social Security benefits, providing a crucial safety net for retirees, disabled individuals, and their families. However, a significant portion of beneficiaries—about 40 percent—find themselves paying federal income taxes on their entitlements. On top of that, some retirees face additional state-level taxes depending on where they live.
Currently, nine states impose a state-level tax on retirement income: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia. However, there may soon be some relief on the horizon for Social Security recipients in Utah and Vermont, where proposals to reduce or eliminate these taxes are gaining traction.
Utah’s Push to Eliminate Taxes on Social Security Income
In Utah, Governor Spencer Cox has proposed eliminating state taxes on Social Security income entirely. Under the current system, single filers with incomes above $45,000 and joint filers with incomes above $75,000 are subject to state taxes on their benefits. If the governor’s proposal becomes law, retirees in Utah could see significant savings, particularly those whose incomes hover just above the existing thresholds.
Vermont Considers Raising the Tax Threshold
Meanwhile, Vermont’s lawmakers are also considering changes. A bipartisan group of legislators is pushing to raise the income threshold at which Social Security taxes apply, with the ultimate goal of eliminating these taxes altogether.
As it stands, Vermonters with incomes under $50,000 for single filers and $65,000 for joint filers are already exempt from state taxes on their Social Security benefits. This accounts for approximately half of the state’s 161,841 Social Security recipients, according to Vermont Public. If the proposed changes are enacted, more retirees could find themselves exempt from state taxes, putting more money back into their pockets.
National Implications
The conversation around Social Security taxation isn’t limited to state-level initiatives. On the national stage, President Donald Trump has pledged to eliminate federal taxes on Social Security income as part of his upcoming second term’s agenda. If this proposal gains traction, it could bring significant financial relief to millions of Americans nationwide.
What This Means for Retirees
For retirees living in states with Social Security taxes, these changes could have a meaningful impact on their financial well-being. As state and federal lawmakers consider reforms, beneficiaries must stay informed and understand how these changes could affect their bottom line.
The proposed changes in Utah and Vermont reflect a growing recognition of the financial pressures facing retirees. Older Americans are struggling across the nation with expenses that outpace their retirement income.
We believe that a bill we call The Elder Relief Act is the best option to create significant change for retirees aged 82 and up. Learn more about this proposed legislation and what we are doing to help older Americans here.