Will Social Security COLA for 2024 affect how much taxes you will pay?

In October, the Social Security Adminstration announced that starting this month, beneficiaries of the programs they oversee would see benefits rise by 3.4 percent. This rise in the value of benefits is called a Cost-of-living adjustment (COLA). For some, the increase could push their incomes above the threshold that subjects them to taxation. Around forty percent of beneficiaries pay federal and state taxes each year (although only several state tax benefits).

Who is required to pay taxes on Social Security benefits?

The answer depends on a beneficiary’s total income, including wages, benefits, and funds from other private retirement accounts like a ROTH IRA or a 401(k).

Those with a Social Security check over $2,083, above the average benefit amount distributed, may have to pay benefits if they are single tax filers as their income would meet the lower limit. For married couples that file jointly, their advantages and any other sources of income add up to more than $2,666. The average benefit in December 2023 for a retired worker was $1,856.38, and given the 3.4 percent COLA, that will rise to around $1,919. If this is a retiree’s only source of income, they are unlikely to see any taxes levied against their income.

When are taxes due?

The tax season starts on Monday, 29 January, and the IRS will begin processing returns shortly after and distributing refunds shortly after. You can submit your return now, which will place you at the head of the queue to receive your refund. There are free options offered by the IRS to those who have an annual income under $79,000. Using a tool created by the tax authority, users are able to evaluate which option best suits their financial needs.

Additionally, the IRS supports taxpayers by setting up clinics staffed by tax professionals to support the public. The locations where these services are offered can be found on the IRS website.

The IRS is still looking for volunteers to staff these clinics.