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The Social Security Fairness Act may affect income taxes and Medicare premiums - CNBC
With much “hoopla,” the so-called Social Security Fairness Act has become law, soon to provide substantively increased Social Security benefits for about 3 million affected beneficiaries. Those affected had their SS benefits reduced (or eliminated) by either the Windfall Elimination Provision (WEP) or the Government Pension Offset (GPO) - which includes about 2+ million who get Social Security retirement benefits, and another approximately 800,000 spouses or widows of SS beneficiaries. And some of that money will be paid retroactively to January 2024 in a lump sum. While that is certainly good news for affected retirees, it also likely means an additional income tax obligation, and may also affect Medicare premiums if the “IRMAA” (Income Related Monthly Adjustment Amount) threshold is reached. All of this is explained in this CNBC Personal Finance article by Lori Konish.
This posting is presented for informational purposes only and does not represent legal or financial guidance. Any opinions or interpretations presented are either those of the original author or, in the case of articles authored by the AMAC Foundation, are the opinions of AMAC Foundation staff, originally trained and accredited by the National Social Security Association (NSSA) and certified via the AMAC Foundation. Any links included in the article are valid on the posted date; socialsecurityreport.org cannot guarantee the duration of the links’ validity. NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity. To submit a question, visit our website (https://amacfoundation.org/services/) or email us at ssadvisor@amacfoundation.org. Because we are a non-profit organization, there is no charge for these services.
i just received my letter for the social security fairness act .i can’t see anything in the letter or on the social security website that says ;whether the lump sum payment is taxable .if so , will it be for 2025 or 2924 . i already sent in my tax forms for this year2024
Bob,
Social Security benefits are taxable income if your combined income from all sources exceeds the threshold for your tax filing status (single or married). If your taxable income from all sources (including money received as a result of the Social Security Fairness Act) exceeds $25,000 as a single filer, or $323,000 as a married filer, then up to 50% of your received Social Security benefits will be included in your taxable income. But if your combined income from all sources is more than $34,000 as a single filer, or more than $44,000 as married/jointly filer, then up to 85% of your received SS benefit becomes part of your overall taxable income. The IRS looks at when you received the money, so if you received that lump sum SS amount in 2025, it should be included in your 2025 tax return. I suggest you consult with a qualified tax professional or CPA to determine how to reflect your lump sum Social Security distribution in your 2025 income tax return (we are not qualified tax professionals here at the AMAC Foundation).
Russell Gloor
Certified Social Security Advisor
The AMAC Foundation