60% Of Older Adults Support Two Year Suspension of Tax on Social Security Benefits
By Doug Osborne, TSCL Legislative Liaison
TSCL is gearing up to ask Congress to enact legislation that would protect Social Security benefits from taxation for 2022 and 2023. About 60% of participants in a recent poll say they support a two-year suspension of the tax on Social Security benefits as inflation continues to erode economic security of people living on fixed incomes.
This year, the 2022 COLA increased Social Security income by 5.9%— the highest amount in 40 years. While inflation-protected benefits are a lifeline, especially at times like these when prices are rapidly rising, a boost of income of this size can come at a cost — the possibility of higher taxes down the road.
Up to 85% of your Social Security benefits can become taxable, based on income thresholds that became law in 1983. Unlike regular IRS income brackets that are adjusted annually for inflation, these income thresholds have never been adjusted for inflation. In 1983, these income thresholds were estimated to affect only 10% of older taxpayers. Today, as many as 56% of older households pay tax on a portion of their Social Security benefits.
The 5.9% COLA that Social Security recipients received in 2022 might be enough to push many older and disabled taxpayers into higher income brackets and cause them to pay taxes on a bigger portion of their Social Security benefits. Others may discover, that for the first time, their incomes are over the income threshold, and they are liable for a tax on a portion of their Social Security benefits. This problem will affect even more people next year when the COLA will be even higher than it is this year.
Here’s the table from the Social Security Administration’s website. If you:
- file a federal tax return as an "individual" and your combined income* is
- between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits.
- more than $34,000, up to 85 percent of your benefits may be taxable.
- file a joint return, and you and your spouse have a combined income* that is
- between $32,000 and $44,000, you may have to pay income tax on up to 50 percent of your benefits.
- more than $44,000, up to 85 percent of your benefits may be taxable.
- are married and file a separate tax return, you probably will pay taxes on your benefits.
* To figure your combined income: Take your adjusted gross income, add nontaxable interest, plus one half of your Social Security benefits. That equals combined income. To get a better idea about your potential tax liability you can find a worksheet in the IRS instructions for the 1040.
New Poll: 60% of Older Adults Support Temporary Suspension of Tax on Social Security Benefits
More than 5,000 people participated in TSCL’s poll which asked: “due to high inflation do you support a temporary two-year suspension on the federal taxation of Social Security benefits to help address unexpected bills?” Here’s how participants answered:
- Yes, I support a two-year suspension. — 60%
- No, I don’t support a two-year suspension — 8%
- I don’t anticipate paying taxes in 2022 —32%
It’s important for everyone to keep in mind that revenues from the taxation of Social Security benefits go to the Social Security and Medicare Trust Fund and are used to pay the benefits of today’s retired and disabled beneficiaries. TSCL feels that fiscally responsible legislation to suspend the tax on Social Security must also provide transfers of revenues from the government’s general fund in the amount otherwise estimated to be received, to the Social Security and Medicare Trust Funds during this period.
What do you think your tax liability will be for the 2022 tax year (due April 15, 2023)? Please let us know by taking TSCL’s 2022 Retirement Survey.
