The House of Delegates in West Virginia has taken a significant step towards providing relief to Social Security recipients, passing a bill that could potentially eliminate taxes on benefits. If Bill 458 successfully navigates through the West Virginia Senate, state-level taxes on Social Security income will be gradually phased out over several years.
The legislation, initially introduced as HB 4880 and now under review by the Senate Finance Committee, builds upon previous efforts enacted in 2019 aimed at reducing income tax on Social Security benefits.
Easing Tax Burdens
Under the current law, single filers with incomes below $50,000 and joint filers below $100,000 have been receiving gradual tax relief. Starting with a 35 percent exemption in 2020, the relief has incrementally increased, reaching 100 percent in 2022.
According to the Social Security Administration (SSA), an estimated 68 million Americans will benefit from Social Security in 2024, marking it as one of the largest state-funded benefits programs in history.
While certain benefit claimants in West Virginia are already exempt from paying taxes on their Old Age, Survivors, and Disability Insurance (OASDI) or Supplemental Security Income (SSI) benefits, the proposed bill aims to extend this tax break to all residents claiming any SSA benefit.
If passed, the tax reduction will be introduced gradually over three years, with a 35 percent reduction in 2024, followed by 65 percent in 2025, and complete elimination by 2026.
West Virginia’s Path to Tax-Free Social Security Benefits
The push to eliminate state taxes on Social Security aligns with Republican Governor Jim Justice’s earlier plans, though the process may take longer than initially anticipated. Governor Justice had aimed to eliminate state taxes on Social Security entirely by 2024, reflecting one of the several tax cuts he proposed since taking office in 2017.
West Virginia’s potential move towards tax relief on Social Security benefits places it among the majority of US states that do not impose state-level taxes on such income. Currently, only 11 states continue to enact taxes on Social Security benefits, as highlighted by Bankrate.
While state-level taxes vary across the nation, it’s important to note that OASDI benefits can still be subject to federal taxation nationwide, while SSI benefits, targeting individuals with extremely low or no income and resources, remain non-taxable.
As the bill progresses through the legislative process, the focus remains on providing financial relief to Social Security recipients and potentially aligning West Virginia with the broader national trend of easing tax burdens on retirees and beneficiaries.
