Two More States Cut Taxes On Social Security Benefits

Social Security benefits will soon become tax-exempt in two states, a positive move for retirees. Starting from January 1, 2024, legislation in Nebraska and Missouri will go into effect, bringing the total number of states that don’t tax Social Security to 41.

This change leaves only nine states that still tax Social Security benefits. Those states include Connecticut, Colorado, Minnesota, Kansas, Montana, New Mexico, Rhode Island, Vermont, Utah, and West Virginia.

The AARP (American Association of Retired Persons) has vigorously pushed for the nationwide exemption of Social Security from state taxes. Although the recent legislative developments in Missouri and Nebraska mark substantial strides, advocacy is still needed in the remaining nine states.

AARP’s Vice President of Government Affairs, Bill Sweeney, underscored the significance of this matter, affirming, “We will persist in our efforts to secure the ability for seniors to retain more of their well-earned money. It is crucial to recognize that Social Security represents your hard-earned income.”

The Missouri provision stands out significantly by eliminating income limits for determining the taxation of Social Security or public pension benefits. As Missouri Senate Bill 190 outlined, Social Security benefits will now be entirely exempt from taxation. However, it’s crucial to emphasize that other taxes may still apply to public pensions.

Before the enactment of this legislation, Missouri’s tax rate varied from zero to 4.95 percent, featuring exemptions for individual filers with earnings below $85,000 and joint filers with earnings of $100,000 or less.

Representative Ben Baker and Senator Tony Luetkemeyer introduced the legislation in reaction to numerous constituents’ financial challenges. Luetkemeyer clarified, “I introduced this bill amid widespread inflation. It returns more funds to Missouri’s seniors, many of whom have fixed incomes, aiding them in managing their expenses.”

Likewise, Nebraska’s unicameral legislature has progressively shifted its position regarding the taxation of Social Security. Initially, a bill presented in 2022 sought to render Social Security benefits tax-free by 2025. However, Legislative Bill 754 expedited this timeline, exempting the benefits as of January 1, 2024. Governor Jim Pillen endorsed the bill, officially enacting it into law in May of the current year.

Before this legislation, Nebraska taxed Social Security at rates ranging from 2.46 percent to 6.64 percent, with exemptions for single filers earning up to $45,790 and joint filers earning up to $61,760.

Social Security benefits tax exemption in Nebraska and Missouri marks a significant milestone in the ongoing effort to provide financial relief to seniors. It ensures that retirees can keep more of their hard-earned money and recognizes the importance of Social Security as a fundamental part of their livelihoods. As more states embrace these changes, it is hoped that the remaining nine states will follow suit, further easing the burden on retirees and supporting their financial well-being.