Recent updates indicate that a significant number of Social Security recipients might owe federal income tax on their benefits for the first time. This change results from the hike in benefits meant to keep up with cost of living changes.
To determine if benefits are taxable, recipients should add half of their Social Security income to their other income, such as pensions, wages, interest, dividends, and capital gains. For single filers, if this total exceeds $25,000, a portion of their benefits may be taxable. For married couples filing jointly, this threshold is $32,000.
Taxation rates vary, with up to 50% of benefits being taxable for individuals with incomes between $25,000 and $34,000, or $32,000 to $44,000 for married couples filing jointly. For higher income brackets, up to 85% of the benefits may be taxable.
The situation is further complicated by state-specific policies. A report from USA Today highlights that in 12 states, Social Security benefits might also be subject to state taxes. These states include Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, and Vermont.
