Good news is coming for many retired people in the United States! Some Social Security checks are going to be $360 more per month, thanks to a new law. But wait—there’s also something important to know: this extra money could also mean higher taxes. Yes, the money you gain might be taxed more than before. Let’s break it all down in a way that’s easy to understand.
What Is the Social Security Fairness Act?
This new law is called the Social Security Fairness Act. Its goal is to give more fair benefits to retired people. Around 3.2 million Americans will receive this monthly increase of about $360.
This boost is even more than what people expected from the usual COLA (Cost of Living Adjustment) in 2025. That means people are getting a real financial help—especially important in times of high prices and inflation.
But There’s a Catch: Taxes Might Go Up
Even though getting more money sounds great, it may lead to a tax surprise. Here’s the issue: if you earn more, you might have to pay more taxes.
Many people don’t realize that Social Security money can be taxed. The government checks something called your provisional income to see how much tax you should pay on your Social Security benefits.
What Is Provisional Income?
Here are some smart ways to reduce your tax bill:
- Lower your provisional income by taking less money out of your retirement accounts.
- Use Roth savings, which are usually tax-free.
- Save money now to cover future taxes.
- Ask the Social Security Administration to withhold taxes from your check so you don’t have to pay a big amount later.
How Much of Your Social Security Is Taxed?
Depending on how much provisional income you have, a part of your Social Security money may be taxed:
For Single Filers:
- Less than $25,000: 0% is taxed
- $25,000 to $34,000: Up to 50% is taxed
- Above $34,000: Up to 85% is taxed
For Married Couples (Filing Jointly):
- Less than $32,000: 0% is taxed
- $32,000 to $44,000: Up to 50% is taxed
- Above $44,000: Up to 85% is taxed
These levels haven’t changed in over 30 years, even though incomes and Social Security payments have increased.
So, Will You Lose 85% of Your Social Security?
No! That’s a common misunderstanding. You’re not losing 85% of your check. Instead, up to 85% of the money could be taxed—at your normal tax rate, which can range from 10% to 37% depending on how much you earn.
This means you might have to pay more tax during tax season. For some people, this could add up to thousands of dollars.
How Can You Avoid a Tax Shock?
Here are some smart ways to reduce your tax bill:
- Lower your provisional income by taking less money out of your retirement accounts.
- Use Roth savings, which are usually tax-free.
- Save money now to cover future taxes.
- Ask the Social Security Administration to withhold taxes from your check so you don’t have to pay a big amount later.
Should You Talk to a Tax Professional?
Yes! A tax expert can help you:
- Choose the right amount to withhold.
- Find out if your state also taxes Social Security.
- Plan ahead so you’re not caught off guard next year.
Any Future Changes to Social Security Taxes?
There’s been talk about changing how Social Security is taxed. For example, former President Trump has said he wants to get rid of these taxes. But so far, nothing official has happened. So, it’s best to plan based on current rules.
Conclusion
Getting an extra $360 a month sounds like great news—and for many retirees, it is. But don’t forget that this raise could mean you’ll owe more in taxes, depending on how much money you already make. Understanding your provisional income, knowing the tax rules, and planning ahead are key to making sure you don’t get an unpleasant surprise when tax season arrives. It’s always wise to talk to a professional and be prepared. A little planning today can save you from a big tax bill tomorrow!
