The bill seeks to amend the definition of Rhode Island income for resident individuals by altering what is added to and subtracted from 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 limits, and specific modifications for insurance benefits for dependents, organ donation expenses, and taxable Social Security income. The bill also introduces a carryover for contributions to tuition savings programs that exceed the annual limit and a one-time subtraction for unreimbursed organ donation expenses, with the latter not applicable to part-time residents or nonresidents.

Furthermore, the bill amends the treatment of Social Security benefits and pension income for tax purposes. For tax years from January 1, 2016, to December 31, 2023, individuals who have reached full Social Security retirement age and fall below certain income thresholds can subtract their Social Security benefits from their federal adjusted gross income. The thresholds are set at less than $80,000 for unmarried individuals and less than $100,000 for married individuals filing jointly. Starting January 1, 2024, the bill allows for a subtraction of $20,000 of Social Security income, marked by an insertion in the legal text. It also adjusts the taxable retirement income from certain pensions or annuities for inflation. The act would become effective upon passage, applying the Social Security income modification for the 2024 tax year.

Statutes affected:
2563: 44-30-12