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NEW VERMONT LAW REDUCES PERSONAL INCOME TAXES BY $5 MILLION FOR SOCIAL SECURITY RECIPIENTS

July 27, 2018

Montpelier, Vt.—Nearly 40,000 Vermonters receiving Social Security benefits will keep more of their income due to an income tax exemption proposed by Gov. Phil Scott and passed by the Legislature. This change, included in Act 11 of the 2018 Special Session, creates a personal income tax exemption for Social Security beneficiaries below certain income thresholds. The law takes effect in calendar year 2018 for tax returns filed in 2019.

“This relief, coupled with our Working Family Taxpayer Protection Act, provides $30 million in income tax relief for Vermonters,” said Scott. “For folks on a fixed income, these savings each year will make a difference. But, we have more work to do to seek tax relief and make Vermont more affordable for retirees and all Vermonters.”

Commissioner of Taxes Kaj Samsom commented: “The Governor and the Department are proud to have worked with the Vermont Legislature on an initiative that will help many Vermonters keep more of their Social Security benefits. With this change, Vermont joins the overwhelming majority of states, including all of our neighbors in the Northeast, in granting additional state-level exemptions to Social Security income, which is taxed federally.”

At the federal level, Social Security benefit exemptions range from fully exempt to 15 percent exempt, depending on income. Benefits that are federally taxable become part of a taxpayer’s Adjusted Gross Income (AGI). The new Vermont tax exemption allows eligible taxpayers to exempt all or some of these federally taxable Social Security benefits on their Vermont returns.

The new Vermont exemption will save Social Security beneficiaries approximately $5 million in tax year 2018 and applies to all types of Social Security income that are taxable at the federal level, including retirement, disability and survivor benefits. Being able to take the exemption depends on the taxpayer’s filing status and level of income or AGI. For single, heads of household, married filing separate, and surviving spouse filers, Social Security benefits will be fully exempt if their AGI is less than $45,000 and partially exempt if their AGI is between $45,000-$55,000. For married joint filers, Social Security benefits will be fully exempt if their AGI is less than $60,000 and partially exempt if their AGI is between $60,000-$70,000.

For more information on the Vermont tax exemption on Social Security benefits, visit www.tax.vermont.gov.

For a transcript of Governor Scott's July 26 press conference remarks, see below. 

Governor Scott: 

With the second oldest population in the nation, 45 percent of Vermonters are either retired or about to retire. We know many of them do so elsewhere. I am sure each of us have heard from people who cannot afford to retire here in Vermont. Many of them leave the state, and those who stay are burdened with increasing costs of living while on fixed incomes. They deserve, as much as anyone, to live with the dignity of a retirement they earned through a lifetime of work.

Part of what has made us so uncompetitive with other states is Vermont was one of only a handful of states to fully tax the federal taxable portion of social security benefits.

In my budget address in January, I asked the Legislature to join me in changing that and am very pleased to report that we did.

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.

As Commissioner Samson will explain, this new exemption saves about 37,000 low- and moderate-income Vermonters about $5 million dollars this year. That number will continue to grow.

For those on a fixed-income, these savings each year will make a difference. But, we have more work to do to seek tax relief and make Vermont more affordable for retirees and all Vermonters.

***

I want to thank Administration Secretary Susanne Young, Finance Commissioner Adam Greshin, and Commissioner Samsom and their entire team for their hard work.

I also want to thank the Legislature, and the House Ways and Means and Senate Finance Committees, for their work to accelerate my original proposal so we could implement the full exemption for some this year.

And I’m pleased to have Senators Lyons and Soucy, as well as Representatives Ancel, McFaun, Sullivan, Turner and Wright here today.

To AARP, we’re pleased to have Greg Marchildon and his colleagues here as well. Thank you for your support, and for ensuring we understand the impact of this tax on your members.

***

While we have more work to do, this relief, coupled with our Working Family Taxpayer Protection Act, provided $30 million in income tax relief.

Additionally, we’ve ensured two consecutive years without raising a single tax and fee in the General Fund, along with level property tax rates for residential payers.

These are critical steps to helping Vermonters keep more of what they earn and move up the economic ladder.

As we continue to work to make Vermont more affordable, grow the economy, and protect the most vulnerable, these steps help us move closer to each of those goals.

I’ll now inviteAARP State Director Greg Marchildon to say a few words.

 

 

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