Beth Pinsker: Inflation adjustments won’t save you from paying tax on 85% of your Social security benefit

by | Nov 14, 2023 | Stock Market

In 2024, the Social Security cost-of-living adjustment will raise benefits 3.2% and the income-tax brackets are going up an average of 5.4%, both because of inflation. But what will not change is the threshold for how much income triggers retirees to pay tax on their monthly benefits. And that means that next year, more than half of all those receiving government retirement checks will pay tax on what they get. Among those who file a tax return, that number goes up to 72% or more paying taxes on Social Security benefits, according to IRS statistics. 

“It’s pretty rare when I have a client who isn’t paying tax on Social Security benefits,” says Phyllis Jo Kubey, a tax specialist and financial planner who practices in New York. “It just doesn’t take much to go over the limit.” The income thresholds for the taxation of Social Security haven’t budged in decades. This is the basic rubric: 
Singles with modified adjusted gross income between $25,000 and $34,000 may have to pay federal tax on up to 50% of benefits. Singles who make more than $34,000 could be taxed on up to 85% of benefits. 

Married filing jointly is between $32,000 and $44,000 for the 50% threshold, and more than $44,000 at 85%

Back in 1984 when the government first started to tax Social Security, making that kind of money a year was considered a pretty good living and only 10% were subject to the tax …

Article Attribution | Read More at Article Source

Share This