The bill amends the "Personal Income Tax" laws in Rhode Island by altering the definition of Rhode Island income for resident individuals. It specifies what additions and subtractions should be made to the federal adjusted gross income for state income tax purposes. Additions include interest from non-Rhode Island state obligations, certain dividends, nonqualified withdrawals from tuition savings programs, unemployment compensation not included in federal income, and amounts over $250,000 from forgiven Paycheck Protection Program loans. Subtractions include interest on U.S. obligations, certain tuition savings withdrawals, contributions to tuition savings programs (with limitations), and specific modifications for insurance benefits, organ donation expenses, and taxable Social Security income. The bill also introduces a carryover for excess contributions to tuition savings programs and a one-time subtraction for unreimbursed organ donation expenses, with the latter not applicable to part-time residents or nonresidents.

Additionally, the bill modifies the treatment of Social Security benefits and pension or annuity income for tax purposes. Starting January 1, 2016, individuals of full Social Security retirement age with income below certain thresholds can exclude their Social Security benefits from their federal adjusted gross income. These thresholds are set at less than $80,000 for unmarried individuals and less than $100,000 for married individuals filing jointly, with annual inflation adjustments. For tax years beginning on or after January 1, 2025, eligible individuals can modify all taxable pension and/or annuity income included in federal adjusted gross income. This is an increase from the previous modification limits of $15,000 for tax years 2017-2022 and $20,000 for tax years starting in 2023. The bill includes provisions for inflation adjustments and rounding rules for these modifications and will take effect upon passage.

Statutes affected:
7485: 44-30-12