Cleveland, Ohio (AP) — Millions of Social Security beneficiaries across the United States are receiving larger monthly checks following a recent cost-of-living adjustment (COLA), but at the same time, many are finding out that they will now have to pay taxes on those benefits, marking the first time for some.
According to a recent survey by The Senior Citizens League, 23% of participants who received Social Security for three years or more said they paid taxes on it for the first time during the 2023 tax season.
Experts are predicting that this trend will continue in 2024 due to last year’s 8.7% COLA increase. The fact that the amount of benefits exempted from taxes has remained unchanged for decades is to blame for this issue.
Mary Johnson, a Social Security and Medicare policy analyst for The Senior Citizens League, stated, “We expect the higher Social Security income will not only cause more recipients to pay taxes on their benefits this tax season, but taxes are taking a bigger portion of Social Security checks in 2024.”
The league has provided a guide for recipients to determine if their benefits are now taxable. They advise individuals to calculate their combined income by taking their adjusted gross income for the year, adding half of their Social Security benefits for the year, and then adding any nontaxable interest.
“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.
Recipients who are unsure if their benefits are now taxable can use an interactive tax assistant tool provided by the IRS for further assistance.
This situation is leaving many recipients concerned about the impact on their finances and raises questions about the fairness of the taxation of Social Security benefits. This issue may prompt legislators to reevaluate the tax thresholds and exemptions to ensure that beneficiaries can receive their benefits without facing undue financial burden. As the situation evolves, recipients will need to stay informed and understand the potential implications for their financial well-being.