The 2024 Social Security Cost-of-Living Adjustment (COLA) is expected to bring changes for retirees and beneficiaries. While the COLA for 2024 is projected to be around 3%, down from the 8.7% adjustment in 2023, there may be a silver lining in terms of taxes.
What does a lower COLA mean for your taxes?
A lower COLA in 2024 may seem concerning, but it could actually lead to reduced taxes for some Social Security recipients. The amount of taxes paid on Social Security benefits is tied to income levels, with higher incomes resulting in higher taxes. The substantial COLA increase in 2023 pushed some beneficiaries into higher tax brackets. However, with a projected lower COLA for 2024, some beneficiaries may find themselves comfortably below the income thresholds and potentially paying lower taxes on their benefits.
It’s important to consider the tax implications of the COLA adjustment and how it may impact your finances. While a lower COLA may imply financial strain, it could actually result in a reduced tax burden for some Social Security recipients.