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Seniors Face Social Security Tax Changes in 2024

In 2024, seniors receiving Social Security benefits may face a significant shift in their tax obligations. This change stems from the 8.7 percent increase in Social Security benefits implemented in 2023 to offset the rising cost of living. With this increase, many seniors might cross the income thresholds that trigger taxation of their Social Security benefits.

Tax Changes Ahead

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Seniors should brace for potentially higher taxes on their Social Security benefits in 2024. The recent increase in benefits might push many into higher income brackets, subjecting them to increased taxation.

The 2023 Benefit Increase

In 2023, Social Security benefits saw an 8.7 percent raise, responding to the growing cost of living. This hike has resulted in the average retired worker receiving $1,827 per month, compared to $1,681 in 2022.

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Taxation Criteria

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Social Security benefits taxation depends on the beneficiary’s total income. Taxable amounts vary based on whether individual income exceeds set thresholds.

Individual Taxpayer Thresholds

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For individual taxpayers, up to 50 percent of Social Security benefits may be taxed if their income is between $25,000 and $34,000. Above $34,000, up to 85 percent can be taxed.

Married Couples’ Taxation

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Married couples filing jointly face similar rules. If their combined income is between $32,000 and $44,000, up to 50 percent of Social Security income is taxable, and 85 percent above $44,000.

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An Example of Tax Calculation

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Consider an individual with $24,000 in annual Social Security benefits. If they earn an additional $10,000, their combined income falls below the $25,000 threshold, exempting them from taxes on their benefits.

Crossing the Taxable Threshold

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However, if their additional income is $20,000, the combined income reaches $32,000. This amount brings them into the taxable range, subjecting up to 50 percent of their benefits to taxes.

High-Income Implications

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For those with $30,000 in extra income, the combined amount would be $42,000. This would mean up to 85 percent of their Social Security benefits could be taxed.

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Tax Rate vs. Taxable Income

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It’s important to note that the 50 percent and 85 percent figures are not the tax rates. Instead, the figures are the portion of Social Security income subject to taxation.

Joint Filing Considerations

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The IRS requires married couples filing jointly to combine their incomes and Social Security benefits when calculating the taxable portion. This applies even if only one spouse received benefits.

Rising Tax Concerns

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The lower combined income thresholds have been critiqued for potentially imposing significant taxes on retirees. Around 40 percent of Social Security beneficiaries currently pay income taxes on their benefits.

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First-Time Taxpayers

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Mary Johnson from The Senior Citizens League highlights a concerning trend. More beneficiaries are expected to pay federal income taxes on their Social Security benefits for the first time in the 2024 tax season.

Inflation and Taxation

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With the increase in Social Security income and unchanged tax thresholds, more retirees are likely to face taxation on their benefits. This change can also increase the portion of benefits that may be taxable.

 The Struggle Despite Increased Benefits

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Despite the increase in benefits, many retirees struggle to meet their expenses. The Senior Citizens League’s survey reports that 68 percent of participants have expenses at least 10 percent higher than the previous year.

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State Taxes on Social Security

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In addition to federal taxes, retirees in 12 states might also pay state taxes on their Social Security benefits. These taxes are typically based on the taxpayer’s age and income level.

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