Allows a modification to federal adjusted gross income for all social security income for tax years beginning on or after January 1, 2027.

Rhode Island Social Security Tax Exemption Bill

This bill would make all Social Security income tax-free at the Rhode Island state level, starting with the 2027 tax year. Currently, some Rhode Island residents who receive Social Security benefits may have to pay state income taxes on a portion of those benefits, depending on their income level. This legislation would remove that tax obligation entirely, meaning no Rhode Islander would owe state income tax on their Social Security income going forward.

The people most directly affected by this bill are Rhode Island residents who receive Social Security benefits — primarily retirees, people with disabilities, and surviving family members who collect survivor benefits. Under this change, these individuals would be able to keep more of their Social Security income without having to pay state taxes on it. The benefit would apply equally regardless of a person's overall income level, since the bill does not include any income-based limits or phase-outs.

It's worth noting that this change would not take effect until January 1, 2027, giving the state time to account for the impact on its budget. Because Social Security is a significant source of income for many residents, exempting it from taxation would likely reduce the amount of income tax revenue the state collects each year. The bill has been introduced and sent to the Senate Finance Committee, where lawmakers will likely examine those budget implications before deciding whether to move it forward.