Posted on November 18, 2019
With tax season just around the corner, I want to share some information about Connecticut’s handling of Social Security taxes that many of you will find helpful.
In 2017, I cosponsored an act to raise the income thresholds for some taxpayers on fixed incomes to be able to deduct 100-percent of their federally taxable Social Security income. This act expanded the eligibility to more taxpayers.
Effective in 2019, the threshold increases from $50,000 to $75,000 for single filers and married people filing separately, and $60,000 to $100,000 for joint filers and heads of household. As under existing law, taxpayers with incomes at or above these thresholds continue to qualify for a 75-percent deduction.
This legislation also assures a 100-percent exemption from income taxes on Social Security benefits for single filers with adjusted gross incomes of up to $75,000 and up to $100,000 for couples. They will save an additional $24 million when they file their 2019 taxes.
Also in 2017, the legislature authorized a phase-out of CT state income tax on pension and annuity income for taxpayers with federal adjusted gross incomes (AGI) below certain thresholds. When passed in 2017, the measure I cosponsored approved a three-year phase-out, beginning with tax year 2019. This was a great piece of bi-partisan legislation and good news for many living on fixed incomes.
Unfortunately, Governor Lamont and his budget-writers proposed eliminating this phase-out as part of their 2020-2021 budget. Unwilling to accept that bad news, my colleagues and I were successful in negotiating to have this phase-out put back in the budget, though the term was extended to six-years, from 2019 to 2025.
So, effective the 2019 tax year, pension and annuity income for people with AGI levels of up to $75,000 for singles and $100,000 for couples will see a 14-percent exemption for this 2019 tax year, an overall savings for them of nearly $33 million. Over the subsequent six years, exemptions from income taxes below those thresholds will continue to phase-out. Please see the below chart for the scheduled phase-out.
Percentage Phase-out of Pension and Annuity Income Tax for Retirees with Certain AGI Levels, 2019-2025
In authorizing the pension and annuity income tax exemption, the legislature also made a conforming change to the existing teacher pension exemption by allowing taxpayers to claim either that exemption or the pension and annuity exemption.
This idea has been in the works for years. In fact, 150 similar proposals had been put forth by members of the House Republican caucus over the past decade. Although I would have preferred the three year phase-out, getting enactment of this policy now represents another small step in a hard-fought, long-term battle for the structural changes my colleagues and I speak about so often.
Your continued support will eventually help us make Connecticut more sustainable and a bit more affordable for residents on fixed incomes, those pondering retirement, young people just starting out, and the rest of us.