The Vermont Legislature passed a bill this session that eliminates the state taxation of Social Security benefits. In Montpelier today, Governor Phil Scott was joined by agency representatives and the AARP to explain how the move will benefit Vermonters.
According to AARP Vermont, until this year the state was one of four that taxed Social Security at the same income level as the federal government. Legislators this session passed and the governor signed a bill that reduces state income taxes on social security benefits.
On Thursday, Governor Scott noted that Vermont has the second oldest population in the nation with 45 percent of residents retired or about to retire. The Republican noted that many leave the state because they can’t afford to stay. “Part of what has made us so uncompetitive with other states is Vermont was only one of a handful of states to fully tax the federal taxable portion of Social Security benefits. Working with the Legislature, AARP and many others we were able to eliminate the income tax on Social security benefits for low and moderate income Vermonters. This new exemption saves about 37,000 low and moderate income Vermonters about $5 million this year and that will continue to grow.”
AARP Vermont State Director Greg Marchildon says no issue, federal or state, is more important to the organization than protecting the financial security of older Americans and he says Social Security is a critical component of that financial safety net. He says the state’s taxation of Social Security benefits needed to be addressed. “Social Security provides the basic foundation of income security for over 143,000 Vermont retirees and their families. Seven out of ten Vermont Social Security beneficiaries rely on that money as a primary source of their income. Vermont was really only one of the few states that still taxed Social Security benefits at the income thresholds set by the federal government way back in 1984 when the median income of Vermonters was significantly lower. So as a result the number of Vermonters paying taxes on their Social Security benefits had more than doubled over the past 34 years. The measure fixes this outdated structure and boosts the household budgets for thousands of older Vermonters.”
Vermont Tax Commissioner Kaj Samsom says about 145,000 Vermonters receive Social Security benefits. While nearly 80,000 pay federal and state taxes, 65,000 beneficiaries are already fully tax exempt. The new law will affect about half, or 37,000, of those who are paying taxes. “Very generally married joint filers with adjusted gross income $60,000 or below will no longer pay or have any taxable Social Security income in the Vermont calculation. And then for single filers everyone under $45,000 of adjusted gross income in Vermont will have no taxable Social Security included. Anyone single with $55,000 of adjusted gross income or less and anyone married filing jointly with $70,000 of income or less is likely going to get some benefit from this proposal. And this is not just retirement income. This also affects all recipients of Social Security which includes disability and survivor benefits.”
The change is in effect and does apply for tax year 2018.