Gov. Spencer Cox has proposed eliminating the state's tax on Social Security benefits as part of his $30.6 billion budget plan, a move that could impact many Utah retirees.
If approved by lawmakers, Utah would become one of more than 40 states that exempt Social Security benefits from state income tax.
“By implementing this tax cut, Utah will demonstrate its dedication to the well-being of older adults and foster a more supportive environment for those who have contributed to the state’s growth and prosperity,” Cox’s proposed FY26 budget states.
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Utah is one of only nine states that still taxes Social Security benefits, and proponents say ending the tax would offer relief for around 150,000 Utahans.
Here’s more of what you need to know.
Utah Social Security tax
The proposed Utah tax reform could have significant financial implications for the state and its residents.
- According to estimates from the Utah State Tax Commission, eliminating taxes on Social Security benefits would cost the state approximately $143.8 million a year.
- However, proponents note that Utah residents currently receiving Social Security benefits could, on average, save around $950 per year, according to the Governor’s office.
Notably, the idea of removing the Social Security tax has garnered bipartisan support in the Beehive State.
An AARP poll conducted last year found that roughly two-thirds of Utah voters support ending the taxes. (That reportedly included 69% of Republicans, 67% of Democrats, and 65% of independents.)
That widespread approval spanned across age groups, with Utahns far from retirement age also reportedly backing the proposal.
“Social Security benefits are a critical component of financial security in retirement,” Danny Harris, AARP Utah Director for Advocacy, stated in a release regarding the poll results. “Older Utah voters recognize this and will fight to defend their hard-earned benefits. That’s why we are urging the Governor and state lawmakers to eliminate the Social Security tax now,” Harris added.
As mentioned, Utah is currently among a few states that still tax Social Security benefits.
That list includes Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Vermont, and West Virginia. (West Virginia has already begun phasing out its tax, with plans to eliminate it by 2024.)
Utah income tax rate
Cox's budget proposal describes this move as a "major tax overhaul.” Some see the initiative as creating a more supportive environment for older adults who contributed to the state's growth.
The proposed tax cut comes as many retirees face increasing financial pressures. With rising costs for essentials like groceries, healthcare, and housing, eliminating the state tax on Social Security benefits could help relieve some retirees living on fixed incomes.
- Utah calculates taxable Social Security income using the federal formula, subject to the state flat income tax rate of 4.55%. However, a tax credit system is in place. (At the federal level, up to 85% of Social Security benefits can be subject to tax, depending on one’s provisional or combined income.)
- Joint filers and heads of households reporting yearly income of $62,000 or less and individual tax filers reporting $37,000 or less currently qualify for a full tax credit on their benefit income.
- The new proposal would simplify this system by eliminating the tax, regardless of income level.
Looking ahead: Cox budget proposal
As the 2025 legislative session approaches, the proposal to eliminate the Social Security tax will likely be a hot topic.
If approved, the potential revenue loss to the state will be a concern. Still, the measure's widespread support and benefits for some older adults and future retirees in Utah make it a compelling tax measure.
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