A federal income tax charge on a portion of their Social Security benefits may cause a sudden financial burden on many retirees during this tax season.
The cost-of-living adjustment (COLA) for Social Security recipients increased by 8.7% in 2023, or an average of $140 per month. This is the largest increase in over four decades. This increase may potentially cause them to surpass the income threshold at which their benefits become taxable.
Surprisingly, the threshold is lower than one might expect. A tax statement could be issued to a married couple with a combined income of no more than $32,000.
“We expect more beneficiaries to become liable for federal income taxes on their Social Security benefits for the first time during the upcoming 2024 tax season,” Mary Johnson, a senior citizens league policy analyst for Social Security and Medicare, told Yahoo Finance.
Unanticipated tax liabilities would impede the financial situation of seniors already struggling to make ends meet. Despite the fact that inflation has declined substantially from its all-time high of 9.1% in June 2022, which was the highest level in forty years, the financial resources of retirees continue to be eroded by exorbitant expenses.
Complete coverage: Taxes 2024 — All the information you require to timely submit your taxes
Consumer prices increased beyond initial projections in December. As measured by the Consumer Price Index (CPI), prices increased marginally by 0.3% month-over-month and by 3.4% year-over-year. Costs such as gasoline, rent, electricity, and auto insurance have all increased.
Over two-thirds of older adults surveyed by the Senior Citizens League reported that their monthly expenditures for necessities including lodging, food, and prescription drugs have increased by 10% in comparison to the same period last year.
Increase Medicare expenditures this year. Part B’s prevailing monthly rate increased from $164.90 to $174.70. In 2024, all Medicare Part B beneficiaries will be required to pay a $240 annual deductible, a $14 increase from 2023.
Yahoo Finance was informed by Ryan Haiss, a certified financial planner at Flynn Zito Capital Management in Garden City, New York, “That is a major shocker for our clients.” “Many people see that Social Security benefits will go up, but they don’t see that their Medicare premiums have gone up as well.”
