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There’s been rumblings about retirees on Social Security possibly paying higher taxes in 2023 and 2024 due to inflation.
But what exactly does that mean?
First: You don’t have to worry about this if Social Security is your only source of income.
But if you’ve been near the cusp of owing taxes on your Social Security benefits, recent and upcoming cost-of-living adjustments may push you over the edge.
Here’s what you need to know.
How Are Social Security Benefits Taxed?
Not everyone is taxed on their Social Security benefits.
The amount of tax you may owe depends on other income you receive this year.
To figure out if you owe taxes, the Social Security Administration considers what’s known as your “combined income.”
Here’s how it works.
When You Do Pay Taxes on Social Security
Retirees must pay taxes on their Social Security benefits if:
- Half of their yearly Social Security benefits + other income = more than $25,000 for single filers or $32,000 for married couples filing jointly.
The IRS won’t tax your entire Social Security income, even if you exceed those thresholds. Instead:
50% of your Social Security benefits are taxable if:
- Half of your benefits + other income = $25,000 to $34,000 for individuals or $32,000 to $44,000 for married couples filing jointly.
85% of your Social Security benefits are taxable if:
- Half of your benefits + other income = $34,000 and up for individuals or $44,000 and up for married couples filing jointly
Only about 40% of people who receive Social Security have to pay federal income taxes on their benefits, according to the Social Security Administration.
When You Do Not Pay Taxes on Social Security
If Social Security is your only source of retirement income, your benefits very likely won’t be taxed.
That’s because the average monthly benefit The amount is $1,623, or $19,476 a year in 2022, according to the Social Security Administration.
That’s well below the $25,000 limit for single filers.
And…
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