Retired Americans are set to receive one of the biggest Social Security increases ever, but the bigger paychecks could push them into a higher tax bracket.
of their Social Security payments — is more than $25,000 if they are single or $32,000 if they are a married couple.
Now, experts say the hottest inflation in a generation could ultimately push more seniors into higher tax brackets as a result of the 8.7% COLA increase — the biggest since 1981. It will increase the average monthly benefit by about $140."The combined income thresholds were originally established in 1984 and updated in 1993 but have not been indexed for inflation," said Tax Foundation senior policy analyst Garrett Watson.
Some seniors may never have owed taxes on their benefits, but that's likely to change next year when they file their tax returns. In fact, the Congressional Budget Office has estimated the share of Social Security benefits subject to tax could grow by 10% this year and another 10% in 2023. In all, total income taxes paid on that money is projected to climb by 37% this year.
On top of that, the Social Security trust fund is estimated to receive more than $45 billion from taxing benefits in 2022 — a major increase from 2021, when it raked in about $34.5 billion,"There can be some very long-term effects to high inflation COLAs," Johnson told FOX Business. "It's like a no-win situation."
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