Does West Virginia Tax Social Security?

For many retirees, Social Security benefits are a significant income source. While the federal government may tax these benefits, state tax policies vary. For West Virginia residents, or those considering moving to the state, the taxation of Social Security benefits has seen recent developments that directly impact financial planning. This article clarifies West Virginia’s current approach to these retirement funds.

West Virginia’s Current Policy on Social Security Taxation

West Virginia has enacted legislation to phase out its state income tax on Social Security benefits. House Bill 4880, signed in March 2024, applies retroactively to the 2024 tax year.

The phase-out will occur over a three-year period:
For the 2024 tax year, 35% of federally taxable Social Security benefits will be exempt from West Virginia state income tax.
For the 2025 tax year, this exemption increases to 65%.
By the 2026 tax year, 100% of Social Security benefits will be fully exempt from state income tax in West Virginia, regardless of income level. This expanded exemption applies to all Social Security recipients, including those whose incomes exceeded prior thresholds.

Determining Your Taxable Social Security Benefits

To determine the amount of Social Security benefits subject to West Virginia income tax, individuals first need to ascertain their federally taxable benefits. The federal government uses a calculation based on “combined income,” which includes adjusted gross income, any non-taxable interest, and half of the Social Security benefits received. Depending on specific income thresholds, up to 85% of Social Security benefits may be subject to federal income tax. This federally taxable amount then serves as the starting point for West Virginia’s state tax calculation.

For West Virginia tax purposes, a “decreasing modification” is applied to the federally taxable portion of Social Security benefits. For the 2024 tax year, taxpayers can subtract 35% of their federally taxable Social Security benefits from their federal adjusted gross income when calculating their West Virginia taxable income. Individuals with a federal adjusted gross income below specific thresholds—$50,000 for single filers and $100,000 for married couples filing jointly—already qualified for a 100% exemption on their Social Security benefits under prior law, and this full exemption continues for them.

Claiming the Exemption or Subtraction on Your WV Return

Claiming the appropriate exemption or subtraction for Social Security benefits on a West Virginia state income tax return involves specific procedural steps. Taxpayers will utilize Form IT-140, the West Virginia Personal Income Tax Return, and its Schedule M, which addresses modifications to adjusted gross income. The Social Security benefit modification is reported on Schedule M, Line 34.

This line requires taxpayers to enter their total Social Security benefits, then subtract any portion that was exempt for federal tax purposes, arriving at the federally taxable amount. For the 2024 tax year, individuals whose federal adjusted gross income exceeds $50,000 (single filers) or $100,000 (joint filers) will multiply their federally taxable Social Security benefits by 0.35 to determine the deductible amount. This calculated amount represents the decreasing modification that reduces their West Virginia adjusted gross income, thereby lowering their state tax liability. Taxpayers should consult the current year’s Form IT-140 instructions for precise guidance on completing these sections.