Will the 2023 COLA Increase Affect Your Taxes This Year?  What to Know

Will the 2023 COLA Increase Affect Your Taxes This Year? What to Know

While the 8.7% COLA increase in 2023 provides financial assistance to Social Security beneficiaries, the inflation adjustment may make it more difficult to file taxes this year. This is because larger monthly checks can mean higher taxes for you.

Remember that if your only source of income is from your Social Security benefits, you probably don’t need to file a tax return — but this statement can help you find out. If you receive other income, such as from a job, the COLA increase may put you in a higher tax bracket. Let’s explain.

Read on to find out if your taxes will be affected by the 2023 COLA increase. For more details on Social Security, here’s the payment schedule and how to file your tax return for free.

Will Social Security beneficiaries be affected by the 2023 COLA increase?

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Yes, but not all recipients will notice a change in their taxes. As mentioned above, if you receive income only from Social Security benefits, you usually don’t need to file a tax return, which means you don’t pay taxes on your benefits.

If you receive income from other sources in addition to your benefits, you may be taxed at a higher rate, depending on how much you earn. This is because while you receive an 8.7% increase in your benefits, the tax threshold for tax filers has not changed, Mark Jaeger, vice president of tax operations at TaxAct, told CNET. That increase could mean more individuals would see a higher tax bill.

There is an advantage. The IRS adjusts tax brackets for inflation, Jaeger said, making the standard deduction about 7% higher each year. This may help offset some of the taxes that Social Security beneficiaries must pay.

For the 2024 tax year, the standard tax deduction for single filers is increased to $14,600, a $750 increase. For those married and filing jointly, the standard deduction has been raised to $29,200, a $1,500 increase.

How much are your taxes?

To figure out how much you can tax, start by looking at your combined income. This includes your adjusted gross income, unpaid interest and half of your new Social Security benefit amount from 2023. Here’s how it breaks down.

  • If you are a tax filer and your combined income is between $25,000 and $34,000, you can pay income tax on up to 50% of your benefits.
  • If you are a tax filer and your combined income is over $34,000, you can pay income tax on up to 85% of your benefits.
  • If you file a joint return and your combined income is between $32,000 and $44,000, you can pay income tax on up to 50% of your benefits.
  • If you file a joint return and your combined income is more than $44,000, you can pay income tax on up to 85% of your benefits.
  • If you are married filing separately and did not live with your spouse in the previous year, your Social Security benefits are taxed as if you were a single filer.

What if I also receive other government benefits?

If you receive other government benefits such as Supplemental Security Income or qualify for the earned income tax credit, the same rules apply to you if you also meet the above criteria, Jaeger said.

For example, if you are still working and your combined income is $32,000, you will be taxed up to 50% of your benefits. If you earn $38,000, you will be taxed up to 85% of your benefits.

What are the tax brackets for the 2024 tax season?

Find out where you fall in the tax bracket below.

Single filers

Taxable income Tax rate
$11,600 or less 10%
$11,601 – $47,150 $1,160 plus 12% on income over $11,600
$47,151 – $100,525 $5,426 plus 22% of income over $47,150
$100,526 – $191,950 $17,168.50 plus 24% of income over $100,525
$191,951 – $243,725 $39,110.50 plus 32% of income over $191,950
$243,726 – $609,350 $55,678.50 plus 35% of income over $243,725
$609,351 or more $183,647.25 plus 37% of income over $609,350

Married, filing jointly

Taxable income Tax rate
$23,200 or less 10%
$23,201 – $94,300 $2,320 plus 12% on income over $23,200
$94,301 – $201,050 $10,852 plus 22% on income over $94,300
$201,051 – $383,900 $34,227 plus 24% of income over $201,050
$383,901 – $487,450 $78,221 plus 32% of income over $383,900
$487,451 – $731,200 $111,357 plus 35% of income over $487,450
$731,201 or more $196,669.50 plus 37% of income over $731,200

Head of household filers

Taxable income Tax rate
$16,550 or less 10%
$16,551 – $63,100 $1,655 plus 12% of income over $16,550
$63,101 – $100,500 $7,241 plus 22% on income over $63,100
$100,501 – $191,950 $15,469 plus 24% on income over $100,500
$191,951 – $243,700 $37,417 plus 32% of income over $191,150
$243,701 – $609,350 $53,977 plus 35% of income over $243,700
$609,351 or more $181,954.50 plus 37% of income over $609,350

For more, here’s how to tweak your W-4 Form to get a higher tax refund (and why you shouldn’t). Also, here’s when to expect your tax refund once you file your taxes.

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