SANDUSKY, OH – Social Security beneficiaries are experiencing a mixed bag this tax season. While many are seeing larger monthly checks due to a recent cost-of-living adjustment (COLA), a surprising number are finding out that they will now have to pay taxes on those benefits, a situation they have never encountered before.
A survey conducted by The Senior Citizens League revealed that during the 2023 tax season, 23% of participants who had received Social Security for three years or more reported paying taxes on it for the first time. With last year’s 8.7% COLA increase, experts predict that this trend will continue in 2024. The issue stems from the fact that the amount of benefits exempted from taxes has remained unchanged for decades, despite annual adjustments for inflation since 1975.
Mary Johnson, a Social Security and Medicare policy analyst for The Senior Citizens League, highlighted the potential impact of this situation. “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,” she said.
The league provided a guide for recipients to determine if their benefits are now taxable, urging them to calculate their “combined income” by taking into account their adjusted gross income, half of their Social Security benefits, and any nontaxable interest. Based on these calculations, they can then assess if a portion of their benefits may be subject to income tax.
These unexpected tax challenges for Social Security recipients have raised concerns about the lack of adjustments to income tax brackets in light of inflation. The league emphasized that thresholds for determining taxable benefits would be significantly higher if they had been adjusted in line with inflation. They also directed individuals to an interactive tax assistant tool provided by the IRS to help them determine if their benefits are now taxable.
As more Social Security beneficiaries contend with the implications of these taxes on their benefits, it is crucial for them to stay informed about potential changes to tax policies and seek assistance from reliable sources to navigate this new landscape.