Social Security recipients got a hefty cost of living increase in 2023, but that may wind up costing beneficiaries more than they expect come tax time.
Here’s Five Fast Facts on Increased Social Security Taxes:
- 👵 COLA - Social Security beneficiaries received an 8.7% cost-of-living adjustment (COLA) in 2023, the largest annual increase in 40 years. It put an average of $140 a month in those monthly checks. Why? Inflation, of course.
- 📈 Add It Up - There’s a slight catch: 85% of Social Security may be taxed. Tax levies are applied to combined income or the sum of half your benefits and total adjusted gross income and non-taxable interest.
- 👎 Half - Brace yourselves, individual filers! If your combined income falls in that sweet spot between $25,000 and $34,000 (or $32,000 and $44,000 if you're hitched), get ready to fork over some dough. Uncle Sam's reaching into your pocket to grab up to 50% of those benefits. Talk about a double whammy!
- ⚖️ Breaking, Laws - Congress is moving to step in with dueling proposals that eliminate or limit Social Security taxation. Big surprise: both proposals differ on how to pay for it. Both proposals are unlikely to advance.
- 👴 Inevitable - One expert said that because Social Security’s combined income thresholds don’t change, more beneficiaries should plan on paying taxes on the money from their checks over time.
🔥Bottom line: These numbers probably sound scary, but do not panic under any circumstances. Talk to a financial expert before you head to Facebook and rage post about how it’s because of Trump or Biden.
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