Story at a glance
- Thanks to a recent cost-of-living adjustment (COLA), millions of people are getting bigger monthly checks from Social Security.
- Many of those people are now learning they’ll have to pay taxes on those benefits — taxes some have never had to pay before.
- Although Social Security has been adjusted each year since 1975 to account for inflation, as FOX News Business explains, “The amount of benefits exempted from taxes has remained unchanged for decades.”
(WJW) — Millions of Social Security beneficiaries are seeing bigger monthly checks thanks to a recent cost-of-living adjustment (COLA), but at the same time, many are now learning they’ll have to pay taxes on those benefits — taxes some have never had to pay before.
According to a recent survey by The Senior Citizens League, during the 2023 tax season, 23% of survey participants who received Social Security for three years or more said they paid taxes on it for the first time.
Now, experts predict the trend will continue in 2024 due to last year’s 8.7% COLA increase.
Here’s why this is happening: Although Social Security has been adjusted each year since 1975 to account for inflation, as FOX News Business explains, “The amount of benefits exempted from taxes has remained unchanged for decades.”
“We expect the higher Social Security income will not only cause more Social Security recipients to pay taxes on their benefits this tax season, but taxes are taking a bigger portion of Social Security checks in 2024,” said Mary Johnson, Social Security and Medicare policy analyst for The Senior Citizens League.
The advice: Social Security recipients need to run the numbers to find out if their benefits are now taxable.
Watch: Federal Taxes 101
Here is a guide provided by the league:
- First, figure out your “combined income.” Take your adjusted gross income for the year (that’s line 11 on an IRS Form 1040), add half of your Social Security benefits for the year, and then add any nontaxable interest (that’s box 8 on an IRS Form 1099-INT). That’s your combined income.
- 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% of your benefits. If it’s more than $34,000, up to 85% of your benefits may be taxable.
- If you file a joint return and you and your spouse have a combined income that is between $32,000 and $44,000, you may have to pay income tax on up to 50% of your benefits. If it’s more than $44,000, up to 85% of your benefits may be taxable.
“If these thresholds had been adjusted more like federal income tax brackets, the individual filing status level of $25,000 would be over $75,250, and the joint filer level would be more than $96,300 based on inflation through December 2023,” explained the league in a news release.
If you still need help determining if your benefits are now taxable, click here for an interactive tax assistant tool provided by the IRS.
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