The Social Security Administration needs taxes to fund the current and future benefits. Some people still do not know that the money you pay now through your payroll taxes pays the retirement benefits of other Americans who worked before.
The lack of funds may force the Social Security Administration to reduce benefits by 2033. At least, that is what an OASDI report stated early this year on SSA. What is more, this is one year earlier than they expected.
So, that is one of the reasons why there could be more taxes in the future. This has nothing to do with the 2024 COLA increase, the amounts have remained the same for years.
SOCIAL SECURITY BENEFITS CAN BE TAXED
It was back in 1983 when the Social Security Administration had to face the introduction of taxes for those on benefits. This was because of the SSA Amendments.
Other changes that also took place back then were the progressive increase in the full retirement age. Therefore, not all Americans have been able to retire at the same age because of that law.
If, for example, you have earnings of more than $25,000, your benefits may be taxed up to 50%. This limit is for those taxpayer who file on their own. But if you are not a single filer, there are higher thresholds.
EARNINGS LIMIT FOR SINGLE FILERS WHO ARE ON BENEFITS
For instance, married couples filing together can have earnings of up to $32,000. Once they earn more than that they may have their benefits taxed up to 50 percent in 2023 or 2024.
There was another law about ten years after the one in 1983, that increased the percentage of taxes. Apart from the 50% tax, there could be taxes on up to 85% of your Social Security benefits.
Thus, if you have earnings over $34,000 (single filers) or $44,000 (married couples filing jointly), there could be taxes on up to 85 percent of your monthly check. The negative thing about this tax is the fact that it has not increased.
As Social Security increases benefits every year inflation rises, millions of Americans may have to pay taxes. Bear in mind that benefits amounts are a great deal higher now than those of 30 or 40 years ago.
Undoubtedly, it is a hidden tax. Many Americans ignore it until they have to file their new tax return. Try to stick to these income limits while on benefits to avoid paying taxes.