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Some big changes to Social Security are floating in the news. Not only will Social Security recipients receive an 8.7% increase in benefits for 2023, but there is also a new bill that may change taxation…
Social Security payments are subject to an income calculation that determines whether benefits are taxed, and to what level. For a full breakdown, click here.
States have their own varying taxation laws that are separate from the above IRS laws. Check your particular state for specifics.
Possible Taxation Change
There is currently a bill that has been introduced that would significantly adjust Social Security taxation.
This new “You Earned It, You Keep It Act” would eliminate taxes on Social Security benefits for 99% of recipients, namely those earning under a certain threshold which is set to be at a level much higher than most Americans earn.
While this is good news for existing Social Security recipients, it will likely add a burden to those currently paying into the system. Currently, workers pay 6.2% Social Security tax on earnings up to $147,000. This bill is proposing to raise that cap on Social Security payroll taxes up to $250,000 income. This would essentially add nearly $6,400 in taxes to those earning above that level, and proportionate amounts to those earning in the new range.
Just A Proposal At This Point
Bills are often introduced and either fall by the wayside, or face significant modifications as they progress.
We’ll be sure to keep you updated on any changes as they occur.