Social Security COLA Increase: In 2023, Social Security recipients saw a record-breaking boost in their monthly benefits of 8.7% for cost of living adjustments. Because of the increased monthly payments, you may owe more taxes this year, which might make filing taxes a little more challenging.
Remember that you probably don’t need to file a tax return if your Social Security benefits are your only source of income, but this statement might help you find out. The COLA rise could have put you in a higher tax rate if you had additional income, such from a job. We’ll clarify.
Find out if the 2023 COLA hike will have an impact on your taxes by reading on. See this article for additional information about Social Security: Why you should save the COLA letter you received the previous year. The Social Security payout schedule and instructions for filing your taxes at no cost are provided here. See also CNET’s list of the top tax programmes for 2024.
Social Security COLA Increase
Yes, however not every beneficiary will observe a tax adjustment. As previously stated, you normally aren’t required to file a tax return if your main source of income is Social Security payments; therefore, you don’t pay taxes on your benefits.
Depending on how much money you make, you can pay more in taxes if you have additional sources of income in addition to your benefits. According to Mark Jaeger, vice president of tax operations at TaxAct, this is because, despite an 8.7% rise in your benefits, the tax threshold for taxpayers has remained same. Jaeger notified CNET of this. More people may pay more in taxes as a result of that rise.
There is a benefit.According to Jaeger, the IRS updated the tax rates to account for inflation, raising the standard deduction by around 7% year. This might assist reduce the amount of taxes that Social Security recipients could be required to pay.
The standard tax deduction for single taxpayers has increased by $750 to $14,600 for the 2024 tax year. The standard deduction for married couples filing jointly has increased by $1,500 to $29,200.
Low COLA Consequences: Almost 40% of Seniors Are Going Back to Work
What is the anticipated tax amount?
Start by looking at your combined income to see how much tax you would owe. This includes half of your increased Social Security benefit amount starting in 2023, your adjusted gross income, and nontaxable interest. This is the breakdown of it.
- Income tax may be due on up to 50% of your benefits if you file taxes as a single and your total income is between $25,000 and $34,000.
- Income tax may be due on up to 85% of your benefits if you file as a single and your total income exceeds $34,000.
- When filing a joint return, you may be required to pay income tax on up to 50% of your benefits if your combined income falls between $32,000 and $44,000.
- Income tax may be due on up to 85% of your benefits if you file a joint return and your combined income exceeds $44,000.
- Your Social Security payments are taxed as though you were a single filer if you are married filing separately and did not reside with your spouse in the previous year.
What happens if I get government assistance in addition?
The same guidelines apply to you whether you fulfil the aforementioned requirements and get additional government benefits like Supplemental Security Income or qualify for the earned income tax credit, according to Jaeger.
For example, if your total income is $32,000 and you continue to work, you may be taxed on up to 50% of your benefits. You would pay taxes on up to 85% of your benefits if your income was $38,000.
