Stopped Taxing Social Security: In retirement, many Americans rely on Social Security to help them make ends meet. For this reason, many people find it surprising to hear that tax authorities frequently include a percentage of Social Security benefits in taxable income, increasing potential tax liabilities.
The federal government does not even need to tax Social Security benefits at all. Once your non-SS income is added to half of your Social Security payments, you may be required to pay taxes on up to half of your Social Security if your total income exceeds $25,000 for single taxpayers and $32,000 for joint filers. When an individual’s income exceeds $34,000 or $44,000 for joint filers, up to 85% of the total becomes taxable.
And if that weren’t awful enough, in certain places state income taxes are also levied on Social Security payouts. The good news is that people in two states that were among those who had their Social Security taxes imposed on them may now exhale with relief as 2024 has begun. Here’s why citizens of Nebraska and Missouri no longer need to be concerned about paying taxes on a portion of their Social Security benefits each month.
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Stopped Taxing Social Security
The effort of Nebraskans to get rid of the Social Security tax has not been easy. However, the Cornhusker State’s taxpayers are now reaping the rewards of their almost three-year labour.
Legislative Bill 64 was approved by Lincoln lawmakers in 2021. With the passage of this act, the state income taxes on Social Security income began a 10-year phase-out. When the legislation was first put into effect, a portion of Social Security income that would have otherwise been taxable was to be exempted, and that share would have increased by 10 percentage points year. The tax would have been completely eliminated by 2030.
Opponents of Social Security taxation were not satisfied, and in 2022, a new draft was introduced in the assembly. The rate of the phase-out was increased by Legislative Bill 873, which also set 2025 as the goal year for the elimination of Social Security taxes.
In Nebraska, it took one last blow to completely eliminate the Social Security tax. A clause of Legislative Bill 754 from 2023 expedited Social Security’s complete tax-free status by one year. The final countdown to around 350,000 Nebraskans never having to worry about whether their Social Security benefits will be taxed began when Governor Jim Pillen signed the measure into law.
