How Social Security Taxes Changes in 2024 Will Affect You?

How Social Security Taxes Changes in 2024 Will Affect You

 A blog post that explains the changes in Social Security taxes in 2024 and how they will affect retirees and people with disabilities.

Introduction, Social Security Benefits Increase in 2024, Social Security Taxable Earnings Limit Increases in 2024, Social Security Benefits May Be Taxed by the Federal and State Governments

The third change is not new, but it is often overlooked by many Social Security recipients: your benefits may be taxed by the federal and state governments, depending on your income level and where you live.

The federal government may tax up to 85% of your Social Security benefits if your combined income exceeds a certain threshold. Your combined income is your adjusted gross income, plus any nontaxable interest, plus half of your Social Security benefits. The thresholds are:

  • $25,000 for single filers
  • $32,000 for married couples filing jointly
  • $0 for married couples filing separately

If your combined income is below these thresholds, your Social Security benefits are not taxed by the federal government. If your combined income is between $25,000 and $34,000 for single filers, or between $32,000 and $44,000 for married couples filing jointly, up to 50% of your benefits may be taxed. If your combined income is above $34,000 for single filers, or above $44,000 for married couples filing jointly, up to 85% of your benefits may be taxed.

The state government may also tax your Social Security benefits, depending on where you live. Currently, 13 states tax Social Security benefits to some extent: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont, and West Virginia. However, some of these states offer exemptions or credits for low-income or senior taxpayers, so you may not owe any state tax on your benefits, depending on your situation.

The good news is that two states, Colorado and West Virginia, have recently passed legislation to stop taxing Social Security benefits, starting in 2024. This means that only 11 states will tax Social Security benefits in 2024, giving some relief to retirees and people with disabilities who live in those states.

To find out how much tax you may owe on your Social Security benefits, you can use the IRS Interactive Tax Assistant tool or consult a tax professional. You can also choose to have federal income tax withheld from your Social Security payments by filling out Form W-4V and submitting it to the Social Security Administration. However, you cannot have state income tax withheld from your Social Security payments, so you may have to make estimated tax payments to your state tax agency.

Social Security taxes are complex and can have a significant impact on your retirement income and planning. In 2024, there are some important changes that you should be aware of, such as the increase in benefits, the increase in taxable earnings limit, and the elimination of state taxes in two states. These changes may affect how much you pay in taxes, how much you receive in benefits, and how you plan for your retirement.

To make the most of your Social Security benefits, you should understand how they are calculated, taxed, and adjusted over time. You should also have other sources of income, such as savings, investments, pensions, or part-time work, to supplement your Social Security benefits. And you should review your budget and retirement plan regularly, and make adjustments as needed.

If you have any questions or need more information about Social Security taxes, you can visit the Social Security Administration website, call 1-800-772-1213, or contact your local Social Security office. You can also use the online tools and resources available on the website, such as the Retirement Estimator, the Benefits Planner, and the Online Services.

We hope this blog post has been helpful and informative for you. Thank you for reading and have a great day!

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