Phillips 66 Retirees Need to be Aware of These States that Tax Social Security Benefits

Healthcare Provider Update: Healthcare Provider for Phillips 66 Phillips 66 offers healthcare coverage through multiple providers, primarily Aetna and Blue Cross Blue Shield (BCBS), depending on the employee's home ZIP code. Employees also have access to a Kaiser HMO option if they live in designated areas of California or Washington. The medical plans include comprehensive coverage for various healthcare services, including preventive care, regular checkups, mental health, and substance use disorder treatments. Potential Healthcare Cost Increases in 2026 Healthcare costs for Phillips 66 employees can be expected to rise significantly in 2026, reflecting broader trends impacting the Affordable Care Act (ACA) marketplace. As major insurers are filing for rate increases that may exceed 60% in certain states, Phillips 66 employees could face steep hikes in out-of-pocket premiums, especially if federal subsidies are not extended. The combination of escalating medical costs and the potential loss of enhanced subsidies means many employees may see their premium costs increase substantially, leaving them with difficult choices regarding their healthcare coverage amidst these changing economic conditions. Click here to learn more

As Phillips 66 retirees in Missouri take advantage of tax-free public pensions and Social Security, Adviser Patrick Ray of the Retirement Group, a division of Wealth Enhancement Group, says understanding state tax policies helps with financial planning and Retirement.

With Senate Bill 448, which provides substantial tax relief, Adviser Michael Corgiat of the Retirement Group, a division of Wealth Enhancement Group, advises Phillips 66 retirees to stay informed about state tax policies as strategic relocation can impact long-term financial security.

In this article, we will discuss:

1. Missouri now exempts Phillips 66 retirees from their public pension and Social Security taxes.

2. Federal versus state taxes on Social Security benefits.

3. Migration trends and their relation to state tax policies on retirement income.

Starting next fiscal year, Phillips 66 retirees in Missouri will be spared state income tax on their public pension and Social Security payments. Senate Bill 448 will save these Phillips 66 retirees an estimated USD 309 million a year.

Background on the Missouri Tax Exemption.

The tax picture was very different in Missouri before Senate Bill 448 took effect in July. State income taxes on residents over 62 with a gross income of USD 85,000 or married couples with a gross income of USD 100,000 were up to 4.95 percent. That exemption reflects a willingness of the state to help retirees with rising living costs - like many Americans.

This isn't a Missouri subject. Social Security payments in the United States average about USD 1,699 a month and run about USD 20,388 annually, according to the Social Security Administration. But many retirees continue to pay taxes on their retirement income - Social Security included - anyway.

Framework for Federal Social Security Tax.

This tax equals the provisional income - that is, the sum of the gross income plus half of Social Security benefits - of each person. Federal tax rates for beneficiaries can be up to 85 percent of Social Security payments. But their provisional revenues below USD 25,000 (or USD 32,000 for couples) are exempt from this federal tax.

While virtually all states in the United States exempt Social Security benefits from taxation, about a dozen states tax them at least in part. This does not include Supplemental Security Income, which is available to people age 65 and older as well as to adults and children with disabilities or vision impairments.
Taxation of Social Security Benefits by State.

Following Missouri's exemption, only Colorado and Connecticut and Kansas and Minnesota and Montana and Nebraska and New Mexico, Rhode Island and Vermont, Utah and West Virginia tax such benefits.

All these states have their own policy, but all provide some tax benefits or exemptions based on age and income of the beneficiary. Some states are moving to expand Social Security exemptions and deductions. So basically deductions reduce taxable income and reduce tax liability.

In relation to Missouri's recent decision, it is interesting to see how Phillips 66 retirees move around. States with tax-friendly policies for Phillips 66 retirees like Florida saw a boom in senior citizens in 2020, according to a United Van Lines study. States that taxed Social Security benefits lost residents by a net amount. As Phillips 66 professionals consider where to retire, states with favorable tax policies might offer financial benefits as well as a leg up on broader migration trends to better suit their retirement goals.

A brief summary of the taxation policies in some of these states:

Colorado: The state income tax cap on Social Security benefits for retirees 65 and older will increase to USD 24,000 beginning in 2021 for Colorado residents. The 55-64 age group can claim only USD 20,000 in medical expenses.

Connecticut: Connecticut tax exemptions are calculated on adjusted gross incomes (AGI). Exempt are those with an AGI below USD 75,000 and couples with an AGI below USD 100,000. Beyond those ceilings, 75% of their benefits are taxable.

Minnesota: Minnesota recently extended those exemptions to include complete deductions for retirees making USD 78,000 for individuals and USD 100,000 for couples.

Montana: Federal regulations exempt Montana retirees with incomes below certain levels. State officials want to abolish Social Security income tax entirely.

Nebraska: A movement to eliminate Social Security taxes by 2025 in Nebraska exempts Phillips 66 retirees below certain AGI limits.

New Mexico: New Mexico law gives full deductions to single residents and couples with some AGIs.

Rhode Island: AGIs below thresholds exempt residents of the standard Social Security retirement age from all taxes.

Utah: In Utah, income brackets determine tax credits for taxable benefits based on Utah income - similar to federal calculations.

Vermont: In 2022, Vermont made full or partial exemptions based on AGI possible.

West Virginia: West Virginia began eliminating Social Security taxes for eligible people and couples in 2020.

In Closing

The changing face of Social Security income taxation highlights state efforts to help retirees out financially. As living costs increase, such policies are necessary to protect our senior citizens. Potential retirees and those in retirement may find these policies helpful in making decisions about residency and finances.

Retirement tax policies are like plotting a course across islands. The Missouri bridge allows retirees tax-free passage on their public pension and Social Security. But as you travel farther, you will pass 11 more islands (states) that still require a toll with different fees and eligibility requirements. For those on the Phillips 66 ship, navigating with this map means more treasure and fewer surprises in retirement.

Added Fact:

A 2023 report from The Senior Citizens League shows that while some states are becoming more tax-friendly toward Social Security benefits, retirees should be aware that state policies can change. To date this year, Colorado, Minnesota, and West Virginia have tightened their Social Security tax policies for retirees, TSCL's report says. But the report also says Nebraska is still gradually eliminating Social Security taxes, so tax policies could evolve. This information is critical for Phillips 66 retirees as they plan for retirement and weigh new state tax policies on their financial future.

Articles you may find interesting:

Added Analogy:

It's like sailing across a shifting archipelago to compare retirement tax policies across states. Just imagine each state as an island with its own toll bridge. You are aboard a vessel - headed toward a comfortable and financially secure retirement as a Phillips 66 retiree. Missouri is the first island where a new bridge lets you keep your public pension and Social Security tax-free. And above the calm water lies another 11 islands with their own toll bridges. Some lowered their tolls, like Colorado and West Virginia, while others like Nebraska are still dismantling their toll booths. Knowing these shifting tax landscapes is like having a course planner - plotting a course to maximize your retirement treasure without running into unexpected financial hurdles. It is a voyage on which knowledge is your compass toward retirement security.

Sources:

1. Missouri Senate.  Senate Bill 448 . Missouri Senate, 2023.  senate.mo.gov .

2. Nelson, Alisa. 'Missouri Bill Would Exempt Social Security Benefits from State Income Tax.'  Missourinet , 10 Jan. 2023.  missourinet.com .

3. Lock, Cheryl. 'States That Tax Social Security Benefits in 2025.'  Kiplinger , 2021.  kiplinger.com .

4. Lock, Cheryl. 'Is Your State Taxing Social Security? Find Out Now.'  Investopedia , 2023.  investopedia.com .

5. Nelson, Alisa. 'Missouri Bill Would Exempt Social Security Benefits from State Income Tax.'  Missourinet , 10 Jan. 2023.  missourinet.com .