Lawmakers Release 2019 Social Security Changes, Seniors In Northern State Affected
If there’s a way for them to get their hands on your money, there’s a good chance that elected government officials will make it happen.
While it’s certainly true that taxes keep the country humming along, it’s also true that the coffers of federal, state, and local governments don’t need to be stocked to the gills at the expense of the well-being of taxpayers.
For older folks, taxes can amount to the difference between having a peaceful retirement and one that’s chock full of stress and worry.
One state has just taken a huge step towards ensuring that more retirees fall into the former category. A northern state finally put two and two together and realized that some positive tax and Social Security changes needed to be made in order to help seniors spread their benefits even farther than they ever imagined before.
Motley Fool has the scoop.
Connecticut’s legislature, which had been tinkering with the idea of doing away with its Social Security tax altogether at one point, recently announced a sizable, and likely welcome, increase in the AGI thresholds set to take effect in 2019.
For those unfamiliar, Connecticut has been allowing individuals with AGIs of $50,000 or less and couples filing jointly with $60,000 in AGI or less to deduct 100% of their Social Security income. That’s considerably higher than the federal tax schedule, but it should also be noted that Connecticut has one of the highest average household incomes in the country.
While average household income may be high in the state, that doesn’t mean that every retiree is living high on the hog.
This small change will make a huge difference for some of the state’s most vulnerable residents, and it’s hard not to chalk that up as a big win.
Beginning in 2019, individual taxpayers receiving Social Security benefits can deduct the entirety of those benefits while earning as much as $75,000 in AGI. Couples filing jointly can deduct the full amount as well by earning up to $100,000 in AGI. Consistent with the current law, individuals and couples exceeding these thresholds will still be able to deduct 75% of their Social Security benefits at the state level.
With these new thresholds, it’s even less likely that retirees in Connecticut will be taxed on their Social Security benefits at the state level. It’s also a great reminder that not all Social Security taxing states need to be avoided. Those with sufficiently high income thresholds — of which Connecticut is certain to belong on that list as of next year — ensure that most senior households will avoid state-level taxation.
We’ll hold out hope that Connecticut’s plan serves as inspiration for other states in the union.
It’s a hit to the state’s coffers, but that can easily be offset by the more efficient management of tax revenues.
Hopefully, Connecticut will take the lead and provide an example for others to follow in this area as well.
Source: Motley Fool