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Federal Income Tax on Social Security Benefits - GoBankingRates
That historic 8.7% Cost of Living Adjustment (COLA) last year was a welcome addition to everyone’s monthly Social Security benefit, but some beneficiaries may be in for a surprise when they file their 2023 taxes this year. A portion of each person’s Social Security benefits received during the tax year becomes taxable by the IRS if that person’s combined income from all sources exceeds a threshold for their tax filing status. Individual tax filers with total combined income over $25,000, or married filers with total combined income over $32,000 will need to pay income tax on half of the SS benefits they received during the tax year. And if the tax filer’s combined income is even higher, so is the amount of Social Security that will be taxed by the IRS. So if that big COLA increase pushed you over the IRS threshold, you will now pay income tax on some of your Social Security benefits.
The thresholds at which Social Security benefits become taxable were first set in 1984 but they haven’t been adjusted since so, every year, more and more Social Security beneficiary’s are surprised to find they suddenly owe income tax on their Social Security benefits. If that historic 8.7% COLA increase pushed you over the IRS threshold, you will owe more to the IRS. And be aware too that anything else that increases your combined income and pushes you over the income threshold for your income tax filing status (such as required minimum distributions, or “RMDs,” from your tax deferred investments) may result in up to 85% of the Social Security benefits you received during the tax year becoming part of your overall income taxable by the IRS. All of this is explained in this GoBankingRates article by Dawn Allcot.
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