A CBS News report highlights that certain recipients of Social Security are likely to experience a rise in their tax payments in 2024 due to inflation-driven increases in their benefits. The annual cost-of-living allowance (COLA), which adjusts Social Security payments to account for inflation, is set to increase all benefits by 3.2% in 2024. This adjustment, however, may push some Americans into higher tax brackets, resulting in increased tax payments compared to previous years.
Mary Johnson, a policy analyst for Social Security and Medicare at the Senior Citizens League, emphasized that there is a widespread misperception that Social Security recipients do not pay taxes. The impact of inflation on taxes is the focus, as it can drive up the tax obligations of beneficiaries.
In 2024, beneficiaries receiving $25,000 to $34,000 annually will face income tax on up to 50% of their benefits, while those earning over $34,000 will have 85% of their benefits subject to taxation. Similar tax rate ranges apply to joint filers, such as elderly spouses, with thresholds set at $32,000 to $44,000 for a 50% tax rate and above $44,000 for an 85% tax rate.
In addition to affecting beneficiaries, inflation will also impact non-beneficiaries, as the top threshold for earnings subject to payroll taxes will rise to $168,600, a significant increase of $8,400, at a tax rate of 6.2%, as reported by CBS.
While the COLA increase will boost payments for some beneficiaries, the report notes that the top earners, receiving up to $5,000 in monthly payments, are typically individuals who paid the maximum into their payroll taxes over their lifetimes and are generally wealthier, relying less on Social Security payments.
On average, monthly benefits paid to beneficiaries are expected to rise from $1,848 in 2023 to $1,907 in 2024. The White House has not provided an immediate response to requests for comment on this matter.
