Increase your Social Security COLA: Do you have to pay taxes on the extra money this year?


Social Security recipients in 2023 received a record 8.7% cost-of-living adjustment increase in their monthly checks. Higher monthly payments can make filing your taxes a little more difficult this year, as you may end up paying more taxes.

This story is part of 2024 taxesCNET covers 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 Social Security benefits, you likely don't need to file a tax return. However, this statement will help you know that. If you have other income, such as from a job, the COLA increase may have placed you in a higher tax bracket. I will explain.

Keep reading to find out if your taxes will be affected by the 2023 COLA increase. For more information on Social Security, see Why you don't want to throw away his COLA letter you received last year. Here's the Social Security payment schedule and how to file your tax return for free. Also, check out his Best Tax Software of 2024 on CNET.

read more: File early and save up to 20% on your 2023 taxes with TurboTax

Could Social Security recipients be affected by the 2023 COLA increase?

tax tips logo

Yes, but not all recipients will notice the tax change. As mentioned above, if your income comes solely from Social Security benefits, you generally don't need to file a tax return. This means you don't have to pay taxes on your benefits.

If you receive income from other sources in addition to your benefits, you may be taxed at a higher rate depending on the amount you earn. Mark Yeager, vice president of tax operations at TaxAct, told CNET that while benefits have increased by 8.7%, the tax base for tax filers remains unchanged. This increase could result in more individuals receiving more tax.

There are advantages. The IRS adjusts taxes for inflation, increasing the standard deduction by about 7% from a year ago, Yager said. This can help offset some of the taxes Social Security recipients may have to pay.

For tax year 2024, the standard tax credit for single filers increased by $750 to $14,600. For married filers filing jointly, the standard deduction increased by $1,500 to $29,200.

How much tax will I have to pay?

To find out how much you might be taxed, first look at your total income. This includes your adjusted gross income, tax-free interest, and half of your new Social Security benefits starting in 2023. The breakdown is as follows:

  • If you are a single taxpayer 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 are a single taxpayer and your combined income exceeds $34,000, you may have to pay income tax on up to 85% of your benefits.
  • If you file jointly 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 file jointly 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 are married, filing separately, and did not live with your spouse last year, your Social Security benefits will be taxed as if you were a single filer.

What if I also receive other government benefits?

Even if you receive other government benefits, such as Supplemental Security Income, or qualify for the Earned Income Tax Credit, the same rules apply if you meet the criteria listed above, Yeager said.

For example, if you are still working and have a total income of $32,000, up to 50% of your benefits will be taxed. If you earn $38,000, up to 85% of your benefits will be taxed.

What is my tax bracket for tax season 2024?

Please check whether you fall under the following tax categories.

single filer

taxable income tax rate
Under $11,600 Ten%
$11,601 – $47,150 $1,160 plus 12% of income above $11,600
$47,151 – $100,525 22% of income above $5,426 plus $47,150
$100,526 – $191,950 $17,168.50 plus 24% of income above $100,525
$191,951 – $243,725 $39,110.50 plus 32% of income above $191,950
$243,726 – $609,350 $55,678.50 plus 35% of income above $243,725
Over $609,351 $183,647.25 plus 37% of income above $609,350

Married person, filing joint return

taxable income tax rate
Under $23,200 Ten%
$23,201 – $94,300 $2,320 plus 12% of income above $23,200
$94,301 – $201,050 22% of income above $10,852 plus $94,300
$201,051 – $383,900 24% of income above $34,227 and $201,050
$383,901 – $487,450 32% of income above $78,221 and $383,900
$487,451 – $731,200 $111,357 plus 35% of income above $487,450
Over $731,201 $196,669.50 plus 37% of income above $731,200

Head of household

taxable income tax rate
Under $16,550 Ten%
$16,551 – $63,100 $1,655 plus 12% of income above $16,550
$63,101 – $100,500 $7,241 plus 22% of income above $63,100
$100,501 – $191,950 $15,469 + 24% of income above $100,500
$191,951 – $243,700 $37,417 and 32% of income above $191,150.
$243,701 – $609,350 $53,977 and 35% of income above $243,700.
Over $609,351 $181,954.50 plus 37% of income above $609,350

For more information, see how to tweak your W-4 form to get more tax refund (and why you probably shouldn't). You can also find out when you can expect your tax refund if you file your taxes and a tax filing cheat sheet here.



Leave a Comment