New Mexico PIT-ADJ line 24 instructions/examples seem contradictory.

[OhTheQuestions]

New Mexico's PIT-ADJ form for income exemptions (from taxation) has line 24 for listing our Social Security income.  In NM in 2022 we have repeatedly been told we're allowed an exemption for all our Social Security income as long as our AGI is less than $100,000 when filing single.  (I do qualify).  But on line 24 TurboTax has put less than half my SS income. 

To me, the NM PIT-ADJ instructions for calculating how much of our Social Security income can be exempted are contradictory/unclear.  (See instructions below.)  I read the calculations form for my Federal AGI and figured maybe Turbotax is doing it right.  The first sentence of explanation would indicate so.  But if that's true, then Example 1 of the instructions makes no sense, because they're allowing that single individual to deduct all their SS income.  Instructions from NM:

"LINE 24. Exemption for social security income.  Enter the amount of social security income included in your Adjusted Gross Income (federal AGI)...

Example 1. Taxpayer A is filing single and has an AGI of $99,500 which includes social security income of $80,000. The taxpayer is able to claim an exemption for the $80,000 since their AGI is not above $100,000.

Example 2. Taxpayer B is filing single and has an AGI of $150,000... does not qualify for the social security exemption because their AGI is over the $100,000 maximum for their filing status."

As you can see in Example 1, the amount of the exemption = the amount of Social Security income.  Which group of people would Example 1 be correct for?    People for whom all of their Social Security income would be taxable as part of their AGI?   People earning more than 80k annually in Social Security? (And are there such people?)   

[JohnW152]

The taxpayers to whom Example 1 would apply would be those whose AGIs are reflected in Table 3, Social Security Income in the 2022 PIT-ADJ Instructions, as you suggest. 

This would apparently apply to a taxpayer such as you. 

On your federal return, a certain percentage of your Social Security was apparently taxable, and included in your federal AGI.  Your federal AGI was then transferred over to Line 9 of your PIT-1 Personal Income Tax Return.

Since you're a taxpayer with an AGI of $100,000 or less, the entire amount of your Social Security benefits that was taxable on your federal return is included as an exemption on Line 24 of the PIT-ADJ Schedule of Additions & Deductions and Exemptions. 

In other words, the portion of your Social Security that was taxable on your federal return, and transferred over to your New Mexico return, is now being exempted on Line 24 of PIT-ADJ.

People whose AGI is over that shown in Table 3, however, don't get the exemption on Line 24 of PIT-ADJ of any taxable Social Security carried over from their federal return.  Whatever amount was taxable on their federal return remains taxable on their state returns.

[OhTheQuestions]

But according to Social Security web site (cut/pasted from SSA at https://www.ssa.gov/benefits/retirement/planner/taxes.html#:~:text=between%20%2425%2C000%20and%20%24....): 

"You will pay tax on only 85 percent of your Social Security benefits, based on Internal Revenue Service (IRS) rules. If you:

• file a federal tax return as an "individual" and your combined income* is
  • between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits.
  • more than $34,000, up to 85 percent of your benefits may be taxable."
    
    So there should never be a case in which the AGI  includes all of someone's Social Security income that year.  Right?  It will never be more than 85% taxable.  

[CatinaT1 · Accepted solution]

That is correct. You would never pay tax on 100% of your Social Security Income; only up to 85% of your Social Security can be taxable.

[OhTheQuestions]

Thank you!   Example 1 cannot possibly happen. 
I fear a lot of New Mexicans will simply read the example, which seems very straightforward, and put in their entire SS income on line 24.   Those not using TurboTax, presumably.  
I appreciate anyone who is kind and takes time to share info with others.  Thank you both.

[DMarkM1]

You are correct the PIT ADJ form instructions for line 24, Social Security Exemption can be misleading.  

The examples used for the PIT ADJ line 24 are meant to show the affect of the 100,000 max Federal Adjusted Gross Income (AGI). The amount of social security is irrelevant.  Whatever amount of social security benefits paid that is included in the federal AGI is what is subtracted from the NM taxable income as long as the federal AGI does not exceed the amounts listed in the table.  This complies with NM tax law. 

However, the instructions say "Enter the amount of social security income included in your Adjusted Gross Income (AGI) up to the AGI listed in Table 3 based on your filing status from PIT-1, line 7."  This would indicate that even if your Federal AGI was over the amount listed in the table for your filing status, you could enter an exemption amount that is social security benefits received that are included in Federal AGI all the way up to that exemption limit.  This does not comply with NM tax law.  

Here is an extract from the NM Law signed by the Governor. 

SECTION 7. A new section of the Income Tax Act is enacted to read: "EXEMPTION--SOCIAL SECURITY INCOME.--An individual may claim an exemption in an amount equal to the amount included in adjusted gross income pursuant to Section 86 of the Internal Revenue Code, as that section may be amended or renumbered, of income includable except for this exemption in net income; provided that the individual's adjusted gross income shall not exceed: 

A. seventy-five thousand dollars ($75,000) for married individuals filing separate returns; 

B. one hundred fifty thousand dollars ($150,000) for heads of household, surviving spouses and married individuals filing joint returns; and 

C. one hundred thousand dollars ($100,000) for single individuals."