Social Security Recipients: Kansas’ Budget Surplus Could Be Solution to Lowering Taxes
In an effort to keep retirees from moving elsewhere, some lawmakers in Kansas aim to use a projected state budget surplus to ease income taxes on Social Security benefits.
Social Security: Why Not Everyone Will Get An 8.7% COLA Increase in 2023
Explore: How Much Does a Person on Social Security Make?
During a legislative hearing last week, state Sen. Caryn Tyson voiced support for removing state income tax on Social Security entirely, the Kansas Reflector reported. She is among a group of lawmakers in Kansas who have spent years trying to pass legislation that would free Social Security recipients from paying taxes on their benefits.
Under the current law, only those with federal adjusted gross income of $75,000 a year or less have Social Security benefits exempt from Kansas income tax, according to the Kansas Department of Revenue. This the case regardless of filing status. The exemption applies only to the extent that benefits are included in your federal adjusted gross income.
Kansas is one of only 12 states that tax some sort of Social Security benefits, according to the AARP. The others are Colorado, Connecticut, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont and West Virginia.
One reason Kansas legislators want to end or ease taxes on Social Security income is because of the so-called “Social Security cliff,” in which, as GOBankingRates previously reported, adding even $1 of additional income could increase overall federal taxable income by as much as 35%. Adding state income taxes to the mix makes the tax burden even greater on Kansas retirees. The fear is that some retirees will move to states that don’t impose income taxes on their benefits.
Kansas’ budget surplus — which hit a record $2 billion this fiscal year and is expected to rise another $400 million — gives the state the financial leeway to ease the tax burden on Social Security beneficiaries.
“As far as it comes with Social Security, I am very interested in addressing the cliff issue,” Kansas state Sen. Tom Holland told the Reflector. “That’s a real problem to me, for people who have paid into Social Security, particularly for those who are seniors who don’t have other additional sources of income. I think it’s imperative that they get access to those funds.”
More From GOBankingRates