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Starting in 2024, Missouri retirees, including teachers and other public employees, will see a major tax change. The state will no longer tax Social Security benefits, and public pension income will now be exempt up to a certain limit. This could mean significant savings for retirees, but there are important details to understand.
Let’s break down what this new law means, how much you could save, and what you need to do to ensure you’re getting the full benefit.
What Changed?
Prior to 2024, Missouri had an income limit that determined whether retirees could qualify for a state tax exemption on their Social Security benefits and public pensions. Now, that income limit has been removed, allowing more retirees to qualify for tax-free benefits. However, there are still important limits to be aware of.
Social Security Benefits
Missouri will no longer tax Social Security benefits for individuals aged 62 and older or for those receiving disability benefits. This change means that 100% of Social Security benefits are now exempt from Missouri state taxes.
Public Pension Benefits
Public pensions, including benefits from PSRS/PEERS and other Missouri public retirement systems, are now exempt from Missouri state taxes up to an exclusion amount. For 2024, that limit is $46,381 per person.
If you receive both Social Security and a public pension, your total exemption for the year cannot exceed $46,381. That means if you receive $30,000 in Social Security benefits, you can only exclude up to $16,318 from your public pension to reach the total limit.
How Does This Benefit Missouri Retirees?
This tax change could lead to substantial savings for retired teachers, public employees, and other Missouri residents. Here’s why it matters:
More Take-Home Income – By eliminating state taxes on Social Security and partially exempting pensions, retirees will keep more of their income.
Tax Savings for Early Retirees – Unlike Social Security, public pensions don’t appear to have an age requirement for the exemption—meaning younger retirees could still benefit.
I have reached out to Missouri Department of Revenue for clarification on this, they were not able to answer my questions on a phone call and had me email their office. I’m still waiting for a response.
Improved Long-Term Retirement Planning – Lower taxes mean retirement income lasts longer, giving retirees more flexibility.
Missouri Becomes a More Attractive Retirement Destination – Many neighboring states still tax some or all of these benefits, making Missouri a more tax-friendly option for retirees.
Who Qualifies for the Exemptions?
Most Missouri retirees receiving Social Security and/or a public pension should qualify for these exemptions. Here’s what you need to know:
· Social Security Recipients: Must be 62 or older or receiving disability benefits.
· Public Pension Recipients: Can exclude up to $46,381 from taxable income.
· Receiving Both? The total exemption cannot exceed $46,381 when Social Security and pension benefits are combined.
· No Income Limit: Unlike past years, all retirees qualify, regardless of income.
It’s important to note that while Missouri has eliminated state taxes on these benefits, federal taxes still apply. Retirees should plan accordingly.
How Much Could You Save?
Let’s look at an example:
A retired Missouri teacher receives $25,000 in Social Security benefits and $30,000 from their PSRS pension.
Their total exclusion limit is $46,381 (in 2024), so they can fully exempt all of their Social Security benefits.
However, only $21,381 of their pension will be tax-free since the combined amount cannot exceed the exemption limit.
Missouri’s 2024 state income tax rate is 4.80%, so they could save around $2,200 per year in state taxes.
Over a 10-year retirement, this could mean more than $22,000 in tax savings.
Where to Adjust Your Taxes
If you qualify for the Missouri pension or Social Security exemption, make sure you correctly report it on your Missouri tax return.
You’ll need to complete Form MO-A, Section 3, where you can list your public pension income up to the exclusion amount to ensure you receive the full tax break.
If you receive both Social Security and a pension, carefully calculate the combined amount to ensure you’re not exceeding the limit.
What Should Missouri Retirees Do Now?
To take full advantage of these tax changes, here are a few key steps:
Review Your Pension and Social Security Benefits: Know exactly how much you receive from each source.
Adjust Your Tax Withholding (If Needed): If your pension was previously taxed at the state level, update your withholding to reflect the new exemption.
Plan for Federal Taxes: While Missouri won’t tax these benefits, federal taxes still apply, so budget accordingly.
Check Your Missouri Tax Forms: When filing your 2024 return, ensure you complete Form MO-A, Section 3 to claim your exemption properly.
Final Thoughts
This tax change is a major win for Missouri retirees, particularly teachers and public employees. With Social Security benefits now fully exempt and public pensions excluded up to $46,381, retirees can keep more of their benefits and make adjustments to retirement projections!
Missouri’s move to eliminate these taxes makes it one of the more retirement-friendly states in the Midwest, helping retirees stretch their income further and enjoy a more comfortable retirement.
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David Gourley, CSLP® is the Founder and lead Financial Planner at K-12 Planning, an independent financial planning firm specializing in finance for teachers. He served for eight years as a high school mathematics teacher before transitioning into the financial services industry. He started K-12 Planning in 2024 and his passion for serving as a fiduciary for teachers and a student loan planning expert runs deep, as his wife and several other family members have served as educators for years.
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