Social Security beneficiariesin 2023 received a record-high 8.7% cost of living adjustment increase on their monthly checks. The higher monthly payments could make filing taxes a bit more difficult this year due to higher taxes you might owe.
This story is part of Taxes 2024, CNET's coverage of the best tax software, tax tips and everything else you need to file your return and track your refund.
Keep in mind that if your only source of income comes from your Social Security benefits, you likely don't need to file a tax return -- but this statement can help you find out. If you receive other income, such as from a job, the COLA increase could have placed you in a higher tax bracket. We'll explain.
Keep reading to find out if your taxes will be affected by the 2023 COLA increase. For more Social Security details, here's why you don't want to throw away that COLA letter you got last year. Here's the Social Security payment schedule, and how to file your tax return for free. Also, check out CNET's best tax software for 2024.
Read more: File Early and Get Up to 20% Off Your 2023 Taxes With TurboTax
Can Social Security beneficiaries be affected by the 2023 COLA increase?
Yes, but not all recipients will notice a change in their taxes. As mentioned above, if you receive income only from Social Security benefits, you're typically not required to file a tax return, which means you don't pay taxes on your benefits.
If you receive income from other sources in addition to your benefits, you could potentially be taxed at a higher rate, depending on how much money you make. This is because while you received an 8.7% increase on your benefits, the tax threshold for tax filers hasn't changed, Mark Jaeger, vice president of tax operations at TaxAct, told CNET. That increase could mean more individuals will see a higher amount of taxes.
There's an advantage. The IRS adjusted the tax brackets for inflation, Jaeger said, making the standard deduction about 7% higher year over year. This may help offset some of the taxes Social Security beneficiaries could have to pay.
For the 2024 tax year, the standard tax deduction for single filers has been raised to $14,600, a $750 increase. For those married and filing jointly, the standard deduction has been raised to $29,200, a $1,500 increase.
How much will you be taxed?
To find out how much you could be taxed, start by taking a look at your combined income. This includes your adjusted gross income, nontaxable interest and half of your new Social Security benefit amount from 2023. Here's how it breaks down.
- If you're a single tax filer and your combined income is between $25,000 and $34,000, you may have to pay income tax on up to 50% of your benefits.
- If you're a single tax filer and your combined income is more than $34,000, you may have to pay income tax on up to 85% of your benefits.
- If you're filing a joint return and your combined income is between $32,000 and $44,000, you may have to pay income tax on up to 50% of your benefits.
- If you're filing a joint return and your combined income is more than $44,000, you may have to pay income tax on up to 85% of your benefits.
- If you're married filing separately and didn't live with your spouse last year, your Social Security benefits are taxed as if you were a single filer.
What if I also receive other government benefits?
If you receive other government benefits such as Supplemental Security Income or are eligible for the earned income tax credit, the same rules apply to you if you also meet the criteria above, Jaeger said.
For instance, if you're still working and your combined income is $32,000, you'd be taxed on up to 50% of your benefits. If you're making $38,000, you'd be taxed on up to 85% of your benefits.
What are the tax brackets for the 2024 tax season?
Find out where you fall in the tax bracket below.
Single filers
| Taxable income | Tax rate |
|---|---|
| $11,600 or less | 10% |
| $11,601 - $47,150 | $1,160 plus 12% of income over $11,600 |
| $47,151 - $100,525 | $5,426 plus 22% of income over $47,150 |
| $100,526 - $191,950 | $17,168.50 plus 24% of income over $100,525 |
| $191,951 - $243,725 | $39,110.50 plus 32% of income over $191,950 |
| $243,726 - $609,350 | $55,678.50 plus 35% of income over $243,725 |
| $609,351 or more | $183,647.25 plus 37% of income over $609,350 |
Married, filing jointly
| Taxable income | Tax rate |
|---|---|
| $23,200 or less | 10% |
| $23,201 - $94,300 | $2,320 plus 12% of income over $23,200 |
| $94,301 - $201,050 | $10,852 plus 22% of income over $94,300 |
| $201,051 - $383,900 | $34,227 plus 24% of income over $201,050 |
| $383,901 - $487,450 | $78,221 plus 32% of income over $383,900 |
| $487,451 - $731,200 | $111,357 plus 35% of income over $487,450 |
| $731,201 or more | $196,669.50 plus 37% of income over $731,200 |
Head of household filers
| Taxable income | Tax rate |
|---|---|
| $16,550 or less | 10% |
| $16,551 - $63,100 | $1,655 plus 12% of income over $16,550 |
| $63,101 - $100,500 | $7,241 plus 22% of income over $63,100 |
| $100,501 - $191,950 | $15,469 plus 24% of income over $100,500 |
| $191,951 - $243,700 | $37,417 plus 32% of income over $191,150 |
| $243,701 - $609,350 | $53,977 plus 35% of income over $243,700 |
| $609,351 or more | $181,954.50 plus 37% of income over $609,350 |
For more, here's how to tweak your W-4 Form to get a higher tax refund (and why you probably shouldn't). Also, here's when to expect your tax refund once you file your taxes and a tax filing cheat sheet.
Insights, advice, suggestions, feedback and comments from experts
Introduction
As an expert in the field of personal finance and taxation, I can provide you with information about the concepts mentioned in this article. My expertise is based on years of experience and a deep understanding of tax laws and regulations. I have helped numerous individuals navigate the complexities of filing taxes and maximizing their benefits.
Social Security Cost of Living Adjustment (COLA) Increase
The article mentions that Social Security beneficiaries in 2023 received a record-high 8.7% cost of living adjustment increase on their monthly checks. This increase in monthly payments can potentially affect the taxes owed by beneficiaries. If you receive income only from Social Security benefits, you are typically not required to file a tax return and do not pay taxes on your benefits. However, if you have additional sources of income, such as from a job, the COLA increase could place you in a higher tax bracket.
Tax Brackets and Deductions
To determine how much you may be taxed, you need to consider your combined income, which includes your adjusted gross income, nontaxable interest, and half of your new Social Security benefit amount from 2023. The article provides tax brackets for the 2024 tax season for different filing statuses, such as single filers, married filing jointly, and head of household filers. These tax brackets indicate the income ranges and corresponding tax rates.
Additionally, the article mentions that the IRS adjusted the tax brackets for inflation, resulting in a higher standard deduction for the 2024 tax year. The standard deduction is a fixed amount that reduces your taxable income. For example, for single filers, the standard deduction has been raised to $14,600, a $750 increase, and for married couples filing jointly, it has been raised to $29,200, a $1,500 increase. This increase in the standard deduction may help offset some of the taxes that Social Security beneficiaries could potentially owe.
Impact on Other Government Benefits
If you receive other government benefits, such as Supplemental Security Income (SSI) or are eligible for the earned income tax credit, the same tax rules apply to you if you meet the criteria mentioned in the article. The amount of combined income you have will determine the percentage of your Social Security benefits that may be subject to income tax.
Conclusion
In summary, the 2023 COLA increase for Social Security beneficiaries can potentially affect their taxes if they have additional sources of income. The tax brackets and standard deductions for the 2024 tax year determine the amount of income tax owed. It is important to consider your combined income and consult with a tax professional or use tax software to accurately calculate your tax liability.
