3 States That Cut Taxes on Social Security Income in 2023

Minnesota

Taxation of Social Security was a contentious issue in St. Paul this session after the collapse last year of a bipartisan budget compromise that would have ended the practice. This year, Gov. Tim Walz proposed cutting taxes on benefits, while several legislators  filed bills to eliminate them.

AARP Minnesota listed ending taxation of benefits as one of its top legislative priorities for 2023.  “With a historic $17.6 billion [budget] surplus, it’s time to stop taxing these hard-earned benefits,” AARP State Director Cathy McLeer wrote in a Jan. 10 letter to lawmakers.

For the 2022 tax year, Minnesotans could deduct some of their Social Security benefits from their state taxes if their income did not exceed $85,970 for a single taxpayer or $110,020 for a married couple filing jointly. Walz proposed raising the income cutoffs and increasing the amount of benefit income residents could deduct from state taxes.

What happened: Legislators gave final approval May 21 to a major tax package that exempts about three-quarters of Minnesota's Social Security recipients from paying state taxes on their benefits. Walz signed the bill May 24.

The measure eliminates state taxation of benefits for individuals with incomes of up to $78,000 and married couples jointly making up to $100,000, starting with the 2023 tax year. It also raises the income threshold for people to qualify for a partial tax break on their Social Security income, to $118,000 for single filers and $140,000 for couples. 

While AARP is “disappointed” that Minnesota lawmakers did not eliminate all state taxation of benefits, McLeer says, the adopted changes “will provide much-needed tax relief to retirees feeling pressure from rising health and long-term care costs and other expenses.”

Missouri

Missourians can deduct 100 percent of Social Security income on their state tax returns if they are 62 or older and have an AGI of less than $85,000 for a single filer and $100,000 for a couple filing jointly. Bills to extend the full deduction to all beneficiaries have fallen short in recent years, but the idea is “getting some traction” this year, says Jay Hardenbrook, advocacy director for AARP Missouri.

That progress came after legislators met in special session in September 2022 to enact tax cuts backed by Gov. Mike Parson, including lower income tax rates and new tax credits for farmers and ranchers. 

AARP lobbied to add provisions targeting tax relief for older Missourians, including the Social Security exemption and broader eligibility for the “Circuit Breaker,” a state property-tax credit for people who are 65-plus or have disabilities, but those were not included in the package Parson signed last fall.

What happened: A bill to extend the full deduction to all Missouri beneficiaries starting in the 2024 tax year was overwhelmingly approved by the state House May 8, three weeks after Senate passage. Parson signed the measure July 6. “The General Assembly responded to our calls for tax relief for older Missourians,” Hardenbrook says. 

Utah

For the 2022 tax year, Utah did not tax Social Security benefits for residents with incomes of less than $37,000 for an individual filer and $62,000 for a couple filing jointly, and the state offered partial tax credits on a sliding scale to beneficiaries with higher incomes. A bill before the state legislature proposed raising exemption thresholds to $44,000 and $74,000, respectively.

Another bill under consideration would have eliminated income as a factor in determining taxation on benefits. Instead, Utahans who receive Social Security would get tax credits of up to $30,000 in benefit income for a single filer, $50,000 for a couple.

AARP Utah called for full removal of the state tax on benefits and for that reason did not come out in support of either of the bills, says Harris, the state advocacy director. A survey commissioned by the state office last year found that two-thirds of Utah voters back eliminating the tax on benefits, with support consistent across age groups and party affiliations. 

AARP Utah collected more than 4,500 signatures for an online petition calling on lawmakers to end the tax and held tele-town halls on the subject.

What happened: Utah lawmakers approved a tax-cut package March 2 that expands the exemption for Social Security benefits to individuals with incomes up to $45,000 and joint filers with incomes up to $75,000, effective for the 2023 tax year. Gov. Spencer Cox signed the measure March 22. “We hoped to remove the tax entirely but are happy with this win,” Harris says.