If you are a retiree or approaching retirement among the Korean community in Morgantown, there is an important change you need to know about this year. West Virginia has completely eliminated the state income tax on Social Security benefits starting from the 2026 tax year.

It sounds simple, but we need to examine how this will actually affect your taxes. So today, I will summarize the confirmed facts and what actions you should take.

First, let's look at the background. This elimination stems from a law called HB 4880 that passed the state legislature in 2024.

The original proposal from the governor was for a full exemption all at once, but the House Finance Committee changed it to a three-year phased reduction. The schedule is 35% in 2024, 65% in 2025, and 100% exemption in 2026.

The West Virginia Tax Division's official page also states that there will be a 65% reduction adjustment in 2025, and a 100% reduction adjustment starting from the 2026 tax year. This is confirmed by the state government, not just rumors.

One point to clarify is that not everyone is benefiting from this for the first time.

Thanks to a law passed in 2019, individuals with a federal AGI of $50,000 for singles and $100,000 for married couples have already been exempt from state taxes on Social Security benefits since 2022. The new HB 4880 expands the exemption to higher income brackets.

This means that those who have income from sources like 401k withdrawals, rental income, or part-time work that exceed the AGI threshold are the real beneficiaries. For those in this bracket, the 65% reduction in 2025 will now become a full exemption.

The state government estimates the cost of this change to be just over $37 million annually. This means that this amount will remain in the pockets of retirees, and I believe this is the right direction.

After a lifetime of work, getting back the money paid in payroll taxes without being taxed again by the state feels like double taxation. Most states in the U.S. do not tax Social Security benefits, so this change is somewhat overdue.

So how does the calculation work? This exemption allows you to deduct the amount of Social Security benefits that are taxable on your federal tax return from your state income.

On the West Virginia state tax return, this is treated as a decreasing modification. You can think of it as the taxable amount of Social Security benefits reported on your federal 1040 being deducted from your state income.

The timing can also be confusing. Since this is a benefit for the 2026 tax year, you will actually feel the impact when you file your 2026 state taxes in the spring of 2027.

This year, the amount of your monthly pension checks will not change. This is because the structure did not involve withholding state taxes from Social Security benefits.

However, if you are paying quarterly estimated taxes, the situation is different. If you have been paying state estimated taxes based on last year's figures, you are likely to overpay for the 2026 tax year.

It would be wise to consult with a tax professional about whether to reduce your remaining quarterly payments. Even if you overpay, you will receive a refund next year, but having your money tied up for nearly a year is a disadvantage.

There are also misconceptions to avoid. Just because Social Security benefits are exempt does not mean that all retirement income is exempt.

Regular workplace pensions, IRA or 401k withdrawals are still subject to West Virginia state income tax. Military retirement pensions are fully exempt, and some public pensions like those for state police or firefighters have separate exemption rules.

If you are over 65, there is also an $8,000 senior deduction adjustment. However, this has a limit if it overlaps with other deduction items, so you should check how much applies to your situation on your tax return Schedule M.

And federal taxes are entirely separate. If your income exceeds a certain level, up to 85% of your Social Security benefits may still be subject to federal taxation.

On the federal side, starting from 2025 through 2028, there will be an additional deduction of $6,000 per person for those over 65. There are conditions that reduce this if your income is high, so keep that in mind as well.

So to summarize: First, pull out your 2025 tax return and check if your federal AGI exceeds $50,000 for singles or $100,000 for couples.

Second, if it does, you are a direct beneficiary of this elimination. You can expect that the 35% of Social Security benefits that were still taxable on your 2025 state return will disappear starting from the 2026 tax year.

Third, if you are paying estimated taxes, consider whether to adjust your remaining quarterly amounts. Fourth, if you are using tax software, make sure to verify that the West Virginia deduction adjustment is correctly accounted for when you file in 2027.

Many people miss this by assuming the software will handle it automatically. It only takes about five minutes to check one line of numbers.

Of course, taxes vary based on income composition, residency duration, and other deduction items, so please confirm specific amounts with a CPA or tax professional.

Personally, I believe this change is significant for those considering retirement locations. With relatively low living costs and the elimination of state taxes on Social Security, there is now a reason to reconsider West Virginia as a potential retirement destination.

If I were you, I would pull out my 2025 tax return before the year ends. It's important to claim the money the government is willing to return, and ultimately, it's your responsibility to ensure you receive it.