The Utah Social Security Tax Credit: A How-To

The Utah legislature provides a tax credit to certain residents who receive Social Security benefits. This nonrefundable credit is designed to lessen the state income tax burden on retirement and disability income for qualifying individuals. The amount of the credit is directly tied to a taxpayer’s income level and the amount of their federally taxed Social Security benefits.

Eligibility for the Tax Credit

To qualify for the Utah Social Security tax credit, a taxpayer must have received Social Security benefits that are subject to federal tax. The credit’s availability is also determined by the taxpayer’s modified adjusted gross income (MAGI). For the 2025 tax year, the income phase-out thresholds are $54,000 for Single filers, $90,000 for Married Filing Jointly and Head of Household filers, and $45,000 for those Married Filing Separately.

If a taxpayer’s MAGI is at or below these limits, they may be eligible for the full credit amount. Taxpayers with income exceeding these thresholds may still qualify for a partial credit, which is gradually reduced as income rises. This is a nonrefundable credit, meaning it can lower your state tax liability to zero, but you will not receive a refund for any credit amount that exceeds your total tax.

Calculating Your Credit Amount

The calculation of the Utah Social Security tax credit begins with determining the full potential credit before any income limitations are applied. This initial amount is found by multiplying the taxable portion of your Social Security benefits, as reported on your federal return, by Utah’s state income tax rate. For the 2024 tax year, the flat tax rate was 4.55%. For example, if you had $10,000 in federally taxable Social Security benefits, your initial credit calculation would be $10,000 multiplied by 0.0455, resulting in a potential credit of $455.

The next step involves applying the income-based phase-out for taxpayers whose MAGI exceeds the established thresholds. The credit is reduced by $0.25 for every dollar of income above the limit for your filing status. For instance, a single filer with a MAGI of $56,000 has income $2,000 over the $54,000 threshold. The reduction is calculated by multiplying this excess income ($2,000) by 0.25, which equals a $500 reduction.

To finalize the credit amount, you subtract the calculated reduction from the initial credit. In the previous example, if the initial credit was $455 and the reduction is $500, the final credit would be zero. The Utah State Tax Commission provides a “Social Security Credit Worksheet” within the TC-40A tax booklet to guide taxpayers through this calculation.

A taxpayer cannot claim both the Social Security credit and the general retirement credit. You must choose the one that provides the greater tax benefit. Taxpayers who might qualify for both should compute their potential benefit under each to make an informed decision.

Claiming the Credit on Your Utah Return

Once you have calculated the final credit amount, you must report it on your Utah state income tax return. The process uses Form TC-40, the Utah Individual Income Tax Return, and its schedule, TC-40A. The Social Security credit is claimed on Part 3 of Form TC-40A.

On TC-40A, Part 3, you will find a line for nonrefundable credits. You must enter the credit code for the Social Security Benefits Credit, which is “AH”, and the final credit amount you calculated. The total of all nonrefundable credits from TC-40A is then carried over to the main Form TC-40.

This transferred amount reduces your Utah tax liability. For example, if your initial tax liability on Form TC-40 is $500 and you are claiming a $455 Social Security credit, your final tax would be reduced to $45. Tax preparation software automatically handles these transfers, but if filing by paper, you must ensure the amount is correctly carried from TC-40A to Form TC-40.