Does Utah Tax Social Security Benefits?
Learn how Utah's tax system treats Social Security income. A state tax credit, based on your income, may reduce or eliminate the tax on your benefits.
How states tax Social Security income is a concern for retirees. Each state has its own regulations, and for residents of Utah, understanding the specific rules is part of financial planning. While Utah may tax Social Security benefits, the state also provides a tax credit designed to reduce this tax burden.
Utah’s Approach to Taxing Social Security
In Utah, Social Security benefits may be subject to state income tax. This is because Utah’s tax calculations begin with federal adjusted gross income (AGI), which can include a portion of your Social Security benefits. The amount of benefits included in federal AGI depends on a taxpayer’s “provisional income”—a figure including AGI, non-taxable interest, and half of their Social Security benefits. If this provisional income exceeds federal thresholds, a portion of the benefits becomes federally taxable and is included in the starting calculations for Utah state tax.
To mitigate the impact of this initial taxation, Utah provides a nonrefundable tax credit for Social Security income. This credit is designed to reduce or eliminate the state tax liability on these benefits for many retirees. The credit is nonrefundable, meaning it can lower a taxpayer’s liability to zero, but no portion will be paid as a refund if it exceeds the tax owed. The availability and amount of this credit depend on the taxpayer’s income.
Qualifying for the Social Security Tax Credit
Eligibility for Utah’s Social Security tax credit is determined by a taxpayer’s modified adjusted gross income (MAGI). For the 2025 tax year, the state has established specific MAGI thresholds that begin a phase-out of the credit. For individuals with a filing status of Single, the phase-out begins at a MAGI of $54,000. For those filing as Married Filing Jointly or Head of Household, the threshold is $90,000, and for Married Filing Separately, it is $45,000.
If a taxpayer’s MAGI is at or below these established limits, they may be eligible for the full credit. A taxpayer’s MAGI includes all income sources from their federal AGI, such as the taxable portion of Social Security benefits, wages, and retirement account distributions.
As income surpasses these thresholds, the credit amount is gradually reduced. This phase-out mechanism means that some taxpayers with income above the limits may still receive a partial credit. The specific reduction is calculated based on how much a taxpayer’s MAGI exceeds the threshold for their filing status.
Calculating and Claiming the Credit
The process of calculating and claiming the Social Security tax credit involves a specific worksheet. Taxpayers use this worksheet to determine the exact amount of their allowable credit by applying the income-based phase-out rules.
The calculation begins by determining the potential credit. This is found by multiplying the amount of Social Security benefits included in your state taxable income by Utah’s 4.55% income tax rate. From there, the worksheet directs the taxpayer to apply the MAGI phase-out. If the taxpayer’s MAGI exceeds their filing status threshold, the credit is reduced. For every dollar of income over the limit, the credit is decreased by 25 cents until it is completely phased out.
Once the final credit amount is determined using the worksheet, that number must be entered on the main Utah Individual Income Tax Return, Form TC-40. The credit is claimed on TC-40A, Part 3, using code AH. This action reduces the taxpayer’s final Utah tax liability. Tax preparation software typically automates this calculation, but those filing by paper must ensure the amount is carried over correctly.