States Differ on Tax Breaks for Elderly

elderly taxes
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Findings by the Institute on Taxation and Economic Policy revealed significant variations on how states treat different forms of income for the elderly.

The study looked at income based on Social Security, pensions, other income tax breaks and property taxes.

Here’s a summary for each income category.

Social Security

Most states don’t tax Social Security, but Colorado, Connecticut, Kansas, Minnesota, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont and West Virginia have varying levels of taxation, including taxing the income at the federal rate.

Pension Income

Most states (40) tax the income in varying ways.

Vermont, Rhode Island, New Mexico, Nebraska, Minnesota and California have no exemptions at all.

Arkansas gives a blanket 6 percent exemption for all pension income. Others have myriad exemptions depending on age, military and civil service, teachers, public vs. private plans, whether private plans are employer funded, and gross income and adjusted gross income limits.

Virginia offers no exemptions exempt for military retirees who hold a Congressional Medal of Honor.

Besides the states with no personal income taxes, Mississippi, New Hampshire, Pennsylvania and  Tennessee treat pension income as fully exempt.

Other Income Tax

Alabama, Alaska, Florida, Maine, Missouri, Nevada, Nebraska, New York, North Carolina, Ohio, and Rhode Island don’t address other income taxation, according to the report.

An extra personal exemption or personal exemption credit, or extra standard deduction, are offered by 23 states.

Illinois and Mississippi exempt all retirement income and offer an extra personal exemption.

Michigan, Tennessee and Virginia offer exemptions based on income.

Property Taxes

Many states offer a standard homestead exemption or one targeting homeowners who are at least 65; several offer income-based tax credits for renters who are either 62 or 65; several offer property tax circuit breaker credits for homeowners and renters who are at least 65.

Oregon is the only state to offer the property tax circuit breaker only for renters who are at least 65.

The institute based its findings on an analysis of census data from 2000 and 2010, states’ Department of Revenue websites, states’ individual income tax provisions, the Wisconsin Legislative Fiscal Bureau of January 2013, and the Lincoln Institute of Land Policy’s report on significant features of property taxes.

About Terry Sheridan

Terry Sheridan

Terry Sheridan is an award-winning journalist who has covered real estate, mortgage finance, health care, insurance, personal finance, and accounting and taxation issues for newspapers, magazines, and websites. A Chicago native and former South Florida resident, she now lives in New England.

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