Retirement Income Tax Credit

UC §59-10-1019

Utah taxpayers may be able to claim a retirement tax credit on their Utah Individual Income Tax Return. Previously, an income exclusion was allowed taxpayers age 65 or over, and a deduction of retirement income received was allowed taxpayers under the age of 65.

Retirement Credit for Taxpayers Age 65 and Over

A taxpayer age 65 or over as of December 31, 2014, may be able to claim a non-refundable tax credit of up to $450. If a married couple filing a joint return are both age 65 or over they may claim a credit of up to $900.

The credit will be phased-out by a percentage of the excess of your modified gross income, over a certain amount based on filing status. See Phase-out Calculation instructions below.

Retirement Credit for Taxpayers Under Age 65

A taxpayer who meets the following requirements and receives eligible retirement income during the year may be able to claim a non-refundable tax credit of up to 6 percent of eligible retirement income or $288 if lesser:

  1. The taxpayer must have been born before January 1, 1953;
  2. The taxpayer must be under the age of 65 as of December 31, 2014; and
  3. The taxpayer must have received eligible retirement income from one or more of the sources listed below.

Eligible retirement income is pension or annuity income paid to a retiree or the surviving spouse of the retiree if the income was:

  1. Paid from an annuity contract purchased by an employer under a plan that meets the requirements of IRC Section 404(a)(2);
  2. Purchased by an employee under a plan that meets the requirements of IRC Section 408;
  3. Paid by the United States, a state or political subdivision of a state, or the District of Columbia; or
  4. Taxable retirement social security benefits (excluding disability or survivor benefits), but only if included in your federal adjusted gross income.

Income that does not qualify as retirement income for credit purposes includes:

  1. Disbursements from deferred compensation plans, such as IRC Section 401(k) and Section 457 plans; and
  2. Social security survivor benefits a child receives on behalf of a deceased employee.

A surviving spouse is entitled to the credit for eligible retirement income received on behalf of a deceased spouse. However, children and other recipients are not entitled to the credit.

Eligible retirement income must be attributable to the taxpayer claiming the credit. Retirement income attributed to a spouse because of community property law does not qualify.

The credit will be phased-out by a percentage of the excess of your modified gross income, over a certain amount based on filing status. See Phase-out Calculation instructions below.

Phase-out Calculation for All Taxpayers

The retirement credit must be reduced by 2.5 percent of the income in excess of the following amounts:

  • $25,000 if filing as single;
  • $32,000 if filing as married jointly;
  • $16,000 if filing as married separately;
  • $32,000 if filing as head of household; and
  • $32,000 if filing as a qualifying widow(er).

Income, for purposes of the phase-out calculation, is the total income shown on your Utah TC-40, line 6 (federal adjusted gross income plus Utah additions to income), plus non-taxable interest as shown on your federal form 1040 or 1040A, line 8b and not included in Utah additions to income.

Credit Calculation

The calculation of the retirement tax credit is done on Utah form TC-40C, Retirement Credit Schedule.

The credit calculated on TC-40C, line 18 is carried over to TC-40A, Part 3, using code 18. If claiming the credit, form TC-40A and TC-40C must both be attached to your Utah return.

Any credit in excess of the tax due will not be refunded, and may not be carried back or carried forward.