Now is the perfect time for Social Security beneficiaries to check how much they might owe in taxes this year. It’s an important step to take. The 8.7% cost of living adjustment in 2023 that increased your monthly checks could potentially complicate your tax filing this year, as it may result in higher taxes owed.
It’s important to note that if your sole source of income is from your Social Security benefits, you may not be required to file a tax return. However, this statement can assist you in determining your specific situation.
If you have additional sources of income, like from employment, the increase in COLA might have pushed you into a higher tax bracket. Allow us to clarify.
Continue reading to learn about the potential impact of the 2023 COLA increase on your taxes. Here’s a compelling reason to hold on to that COLA letter you received last year – it contains important information about your Social Security benefits.
Presenting the Social Security payment schedule and providing guidance on how to file your tax return without any cost. Additionally, take a look at CNET’s top tax software for 2024.
Yes, however, it is unlikely that all recipients will be affected by any alterations in their taxes. As stated previously, individuals who solely receive income from Social Security benefits are generally not obligated to file a tax return and are therefore exempt from paying taxes on their benefits.
If you have additional sources of income apart from your benefits, there is a possibility that you may be subject to a higher tax rate, depending on the amount you earn.
According to Mark Jaeger, vice president of tax operations at TaxAct, the tax threshold for tax filers has remained unchanged, despite the 8.7% increase in benefits you received. That increase could potentially result in a larger tax burden for many people.
There is a positive aspect. According to Jaeger, the IRS has made adjustments to the tax brackets to account for inflation, resulting in a roughly 7% increase in the standard deduction compared to the previous year. This could potentially assist in mitigating the tax burden for individuals receiving Social Security benefits.
In the 2024 tax year, the standard tax deduction for single filers has been raised to $14,600, reflecting a $750 increase. For individuals who are married and filing jointly, there has been a recent increase in the standard deduction. It has been raised to $29,200, which is a $1,500 increase.
Analyzing Potential Tax
To determine the potential tax amount, begin by examining your total income. This encompasses your adjusted gross income, nontaxable interest, and half of your new Social Security benefit amount from 2023. Let me provide you with a breakdown.
For single tax filers with a combined income ranging from $25,000 to $34,000, there may be a requirement to pay income tax on a portion of their benefits, potentially up to 50%.
For single tax filers with a combined income exceeding $34,000, there may be a requirement to pay income tax on a portion of their benefits, potentially up to 85%.
If you are filing a joint return and your combined income falls within the range of $32,000 to $44,000, there is a possibility that you may be required to pay income tax on a portion of your benefits, up to 50%.
If you’re filing a joint return and your combined income exceeds $44,000, you may be required to pay income tax on a significant portion of your benefits.
If you were married but didn’t live with your spouse last year and are filing separately, your Social Security benefits will be taxed as if you were filing as a single individual.