Some beneficiaries of Social Security are likely to see their tax payments increase in 2024 as a result of inflation-driven increases to their benefits, according to a report by CBS News.
Every year, the amount of money paid to a Social Security beneficiary increases to account for inflation, known as cost-of-living allowance (COLA). In 2024, the COLA is set to increase all benefits by 3.2%, which will place some Americans in a higher tax bracket and, hence, lead to them paying more taxes than previously, CBS reported. (RELATED: Social Security Cost-Of-Living Adjustment Gets Biggest Bump In Decades To Keep Up With Inflation)
“There is a wide misperception, and it’s not helped by social media at all, that Social Security recipients don’t pay taxes, and that’s not at all the case,” said Mary Johnson, a policy analyst for Social Security and Medicare at the Senior Citizens League to CBS News. “We are dealing with the tax side of inflation here, and inflation can drive up your taxes.”
Today’s 3.2% #COLA announcement is welcome news, but Social Security benefits haven’t kept pace with the everyday costs that seniors face. After decades of inaction, now is the time to enhance benefits & improve the COLA by passing Social Security 2100! pic.twitter.com/R4rneWg9EV
— Rep. John Larson (@RepJohnLarson) October 12, 2023
In 2024, beneficiaries who receive between $25,000 to $34,000 a year will have income tax on up to 50% of the benefits, while recipients of over $34,000 will have 85% of their benefits being taxable, CBS reported. The ranges differ for joint filers of income tax, such as two elderly spouses, whose equivalent ranges are $32,000 to $44,000 for a 50% tax rate and above $44,000 for an 85% tax rate, respectively.
Inflation will also affect non-beneficiaries whose payroll taxes currently fund the program. The top threshold for earnings subject to the tax will rise to $168,600, an increase of $8,400, at a tax rate of 6.2%, CBS reported.
The COLA will increase some beneficiaries’ payments to a significant amount, with the top earners of Social Security receiving up to $5,000 in monthly payments. However, because these beneficiaries paid the maximum over their lifetimes, they are generally likely to be wealthy and non-reliant on Social Security payments.
“The only way to get it is if you’re [Apple CEO] Tim Cook and you have been paying the maximum” into your payroll taxes, she joked. “It’s like the 1% to 2%.”
On average, the monthly benefit paid to beneficiaries will rise to $1,907 per month in 2024 from $1,848 in 2023.
The White House did not immediately respond to a request for comment.
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