Youngstown, Ohio – New information reveals that millions of Social Security beneficiaries are now required to pay taxes on their benefits, representing a substantial change for many individuals who have never faced this obligation in the past. The recent cost-of-living adjustment (COLA) has resulted in larger monthly checks for recipients, but it has also triggered the imposition of taxes on these benefits, catching many off guard.
According to a recent survey conducted by The Senior Citizens League, 23% of participants who had been receiving Social Security for three years or more reported that they paid taxes on their benefits for the first time during the 2023 tax season. The trend is expected to continue in 2024 due to an 8.7% COLA increase from the previous year.
The current issue arises from the fact that the amount of benefits exempted from taxes has not kept pace with inflation, leading to the unexpected imposition of taxes on Social Security benefits for many recipients. Mary Johnson, a Social Security and Medicare policy analyst for The Senior Citizens League, emphasized that the higher income from Social Security will likely result in more recipients having to pay taxes on their benefits and a larger percentage of their checks being allocated to taxes in 2024.
To determine if their benefits are now taxable, Social Security recipients are advised to calculate their combined income, which includes their adjusted gross income, half of their Social Security benefits, and any nontaxable interest. The league provides specific thresholds indicating when benefits begin to be taxed, which vary based on filing status and combined income levels.
The league also expressed that if the thresholds had been adjusted to account for inflation, the income levels triggering taxes would be substantially higher. For individuals requiring assistance in determining whether their benefits are now subject to taxes, an interactive tax assistant tool is available on the IRS website. This tool can help individuals understand their tax obligations and make informed financial decisions regarding their Social Security benefits.