global Tax RI Individual Income Tax Modifications for Pensions and Social Security July 31, 2023 Attention Rhode Islanders…are you ready for changes to your state taxation of pension income effective for tax years beginning January 1, 2023? Here’s a closer look at what’s changing. Are you a Rhode Island taxpayer collecting retirement income? The Ocean State passed its fiscal year 2023 budget last year, with changes to military service and other pensions taking effect for next tax season. Here’s what you need to know. What’s changing? For tax years beginning January 1, 2023: Military service pensions will be exempted from Rhode Island Personal Income tax. Impacted taxpayers can subtract the amount of the military service pension benefits that were included in their federal adjusted gross income to calculate their modified federal adjusted income for Rhode Island tax purposes.The amount of taxable pension and/or annuity income that can be exempted from Rhode Island personal income tax will increase from $15,000 to $20,000. Joint filers may qualify for a combined total modification of $40,000. This applies to qualified taxpayers with federal adjusted gross income (AGI) that includes taxable income from sources such as pensions, 401(k) plans, and annuities, who have reached “full retirement age” as defined by the Social Security Administration and whose federal AGI is below a certain amount. Can taxpayers qualify for both exemptions? Yes, however, impacted individuals cannot include military pension income in the modification for other various pensions and annuities, because income cannot be deducted more than once. Don’t forget the modification for social security… In addition to the exemptions for pension income mentioned above, social security income is still exempt from state taxation based upon your federal AGI being below certain limits and upon reaching “full retirement age”. Questions? Contact us.
