PROVIDENCE – The R.I. Division of Taxation released a guide Tuesday to a new tax modification for pension and annuity income.
The tax reduction is applicable to income from 401(k) plans, 403(b) plans, private-sector pensions, government pensions, military retirement pay, annuities and similar sources.
The tax modification reduces federal adjusted gross income for Rhode Island tax purposes, allowing eligible recipients to exclude up to $15,000 of federally taxable income from Rhode Island personal income tax. The tax break could apply to both spouses as well, potentially saving a couple up to $30,000.
The DOR estimates that the tax break could result in a $563 saving for someone who is single, or up to $1,125 for a married couple filing a joint return.
The tax break requires that a taxpayer reach full retirement age as defined by the Social Security Administration, that the taxpayer have an applicable income source, and that a taxpayer’s adjusted gross income is below a certain amount ($80,000 for a single taxpayer, $100,000 for a jointly filed couple).
The full guide can be found at the Division of Taxation’s website.
The tax break was signed into law in June 2016 and is applicable to tax years beginning on or after Jan. 1, 2017.
“We are posting this plain-language guide well in advance of the filing season in order to give taxpayers and tax professionals plenty of time to get accustomed to the new personal income tax modification and how it works,” said Tax Administrator Neena S. Savage. “Given that the new modification first applies for the 2017 tax year, the guide may also come in handy for tax-planning purposes for the balance of this calendar year.”
Chris Bergenheim is the PBN web editor.