On Sunday, Jan. 23, on page 7 of the Observer, in the bottom corner, a very short article on the introduction of bills that’d eradicate New Mexico’s tax on Social Security benefits was discussed.
This is huge news for all New Mexicans and our economy.
New Mexico is an excellent retirement destination. The positive effect of having no income tax on Social Security benefits would be the resultant increase in spending and investment those retirees would (and do) bring to our communities.
If New Mexico continues to tax Social Security benefits, potential new resident retirees and those eyeing this as a great place to eventually retire may be deterred from choosing our state as their final destination.
Unfortunately, they may choose a more tax-friendly state like our neighbor, Arizona.
The previous article was inaccurate. Only 12 – not 13 – states tax Social Security benefits. According to Kiplinger’s, those states are: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont and West Virginia.
Each state taxes Social Security differently. New Mexico treats Social Security benefits the same way as the federal government, which taxes up to 85 percent of your benefits, depending on your income.
The state does allow individuals age 65 and older with an adjusted gross income of $28,500 or less and married couples of an AGI of $51,000 or less to deduct up to $8,000 in income, which can be applied to benefits.
Other states tax Social Security benefits only if income exceeds a specified threshold amount. For example, Missouri taxes Social Security benefits if individual income tops $85,000, or $100,000 for married couples.
Why is this so important now? Because there are two bipartisan bills which would exempt Social Security benefits from income tax and repeal the current tax policy on Social Security benefits.
Senate Bill 108, titled Exemption-Social Security Income, was introduced on Jan. 20 to the Senate Tax, Business and Transportation Committee by Reps. Gail Armstrong and Cathrynn M. Brown, and Sen. Michael Padilla.
It reads, in part, “An individual may claim an exemption in an amount equal to the amount included in adjusted gross income pursuant to Section 86 of the Internal Revenue Code.”
Essentially, that language translates to the amendment of the current law to not tax Social Security benefits as income.
Senate Bill 121 was introduced the same day by Sens. David M. Gallegos and Mark Moores.
It has 16 total legislative sponsors, and it reads very similarly to SB 108, regarding the exemption of Social Security income from taxation. Both documents can be found at nmlegis.gov.
The slight loss of income tax would be far offset by the increase of sales and property tax revenues made by those retirees and new residents moving to retire here.
I encourage us to reach out to our legislative representatives in support of this new and overdue exemption.