The limit on the non-taxable amount in Social Security checks has not changed for more than 30 years. It was in 1984 when pensioners started paying payments if they exceeded a certain limit on their income. This has not changed since then. So it could eventually be the case that many of the pensioners would lose part of their subsidy. By not increasing the threshold the taxable portion, the COLA would play very much against a large portion of pensioners.
For this reason, many pensioners who only collect Social Security are wondering if they will be paying more taxes in 2023 because of the COLA. The answer is yes. But in some cases, many retirees will have to start paying taxes that they did not pay before. This is a huge setback, as it causes them to have less money at the end of the year.
Thus, the announcement of the Social Security COLA increase could be bad news for many. Every taxable tax depends entirely on each personal situation, which is why you should seek benefits in case you don’t know exactly how tax payments work. Therefore, a supposedly great advantage could be a disadvantage in the end. The rule for payment of taxes is usually quite clear. Even so, it is advisable to look for a specialist lawyer who can help us avoid making mistakes in this important matter.
How do I know if I have to pay Social Security COLA taxes?
The combined income threshold for paying taxes is $25,000 per year for individual filers. On the other hand, Social Security recipients filing jointly can reach $32,000 per year before they start paying taxes. Exceeding $25,000 individually – or $32,000 per couple – requires up to a 50% Social Security payment. If they exceed this threshold, beneficiaries could potentially split up to 85% of their benefits.
Since this minimum threshold has not changed for years, the COLA has been increasing benefits. For that reason, a person who paid no taxes 10 years ago, today could exceed that threshold. This means that he or she will end up having a benefit that is ultimately subtracted from his or her monthly payment for this reason.
Despite all of this, it should be noted that the COLA was created so that retirees would not lose purchasing power and that is still the plan. The only thing that needs to be changed is that threshold to bring it much more in line with current times.