What Economists Say About Social Security Tax Increases

Each year brings in a wave of tax changes for everyday Americans, and in 2024, seniors can expect tax increases on Social Security.

This comes as benefits climbed 3.2 percent as a result of the cost of living adjustment. According to finance experts, taxes will likely increase in line with inflationary adjustments to all tax brackets.

There's the standard deduction, which has risen to $14,600 for single filers and is the set amount taxpayers can deduct from their taxable income.

And in terms of the earned income subject to Social Security taxes, seniors can expect a jump, from $160,200 to $168,000.

Three experts chimed in on what Social Security beneficiaries can expect this year.

The Professor

Caroline Bruckner, an accounting professor at American University, said that while seniors will see tax increases on Social Security, they've also earned an overall higher benefit amount due to the COLA. However, with grocery costs jumping 25 percent in the past five years, this might not help them as much as one might believe.

"Seniors will receive increased benefits, but inflation and the cost of groceries in particular are still high," Bruckner told Newsweek.

"For seniors on fixed incomes, this is going to be tough, even with increased benefits."

While seniors with higher incomes could end up paying taxes on up to 75 percent of their Social Security benefits, the reality will be quite different for low-income seniors, who will likely see zero taxes on them.

"Seniors who expect to have higher amounts of taxable income, including their Social Security benefits, should plan to set aside money to pay taxes in the event their benefits are subject to tax," Bruckner said.

The Financial Planner

Starting in 2025, taxpayers will be playing in a new ballpark as the Tax Cuts and Jobs Act goes into effect, Tyler Meyer, a certified financial planner and the founder of RetireToAbundance.com, said.

"This will likely lead to very real increases in tax rates for most Americans," Meyer told Newsweek. "Having a solid plan with a built-in cushion for your discretionary spending can go a long way in lowering the stress of these uncertainties surrounding retirement."

Seniors who receive Social Security benefits today could be in line to receive some of the last payments, as some experts predict the Social Security system will become insolvent by the early 2030s if nothing changes. They say too many Americans are retiring into the system while too few Americans of working age are paying into it. This could cause benefits to be reduced due to the shortfall.

The Tax Prep Expert

Many seniors are unaware filing for taxes, even if they make under the minimum income amount, can be beneficial and earn them a refund they would have missed out on otherwise, another tax expert said.

"If federal income tax was withheld from your Social Security benefits or other sources of income, filing a tax return is the only way to receive a refund of the overpaid taxes," Zack Hellman, the owner of Tax Prep Tech, told Newsweek.

Refunds typically go to seniors who have part-time jobs and a low level of Social Security income each month.

You also may qualify for tax credits, like the Earned Income Tax Credit or Additional Child Tax Credit, which you can only take advantage of by filing a tax return.

And for seniors on Medicare, the income reported on your tax return affects the premiums you pay for Medicare's Part B and Part D coverage, Hellman said.