In a recent report by GOBankingRates, it was highlighted that in 2025, Social Security benefits will not be taxed in 41 states across America. Missouri and Kansas have already made the decision to stop taxing Social Security benefits in 2024, with Kansas following suit shortly after. This leaves only nine states in the country that will continue to tax these benefits in 2025.
Social Security has recently announced a COLA (Cost of Living Adjustment) increase for the year 2025. This news holds significant importance for retirees, as it directly impacts their income and financial planning. Here are five key points that retirees should be aware of regarding this COLA increase.
1. Adjustment for Inflation: The COLA increase is designed to help retirees keep up with the rising cost of living. It is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which measures the changes in prices of goods and services. The increase aims to ensure that retirees’ benefits maintain their purchasing power over time.
2. Determining the COLA Increase: The exact percentage of the COLA increase for 2025 will be determined by the inflation rate. The Social Security Administration uses specific calculations to determine the COLA, taking into account the average CPI-W for the third quarter of the current year compared to the third quarter of the previous year.
3. Potential Impact on Benefits: The COLA increase can have a direct impact on retirees’ Social Security benefits. The higher the COLA, the larger the increase in benefits received by retirees. This adjustment is especially crucial for retirees who heavily rely on their Social Security benefits as a source of income.
4. Anticipating the COLA Increase: Retirees should monitor the CPI-W throughout the year to anticipate the potential COLA increase for the following year. Staying informed about changes in prices and inflation trends can help retirees better plan their finances and adapt to potential adjustments in their benefits.
5. Importance of Financial Planning: The COLA increase serves as a reminder for retirees to review their financial plans and make any necessary adjustments.
Retirees should assess their overall financial situation, including expenses, savings, and investments, to ensure they are prepared for any changes in their Social Security benefits.
In conclusion, the COLA increase announced by Social Security for 2025 is a significant development for retirees. Being aware of the implications and planning accordingly can help retirees navigate the potential impact on their income and ensure financial stability in the years to come.
Here are three important facts about the future of Social Security.
In 2025, Colorado will still impose taxes on the benefits received by Social Security recipients. However, there is an important exception to be aware of.
Individuals aged 55 to 64, with an adjusted gross income of $75,000 or less, and couples filing jointly with an adjusted gross income of $95,000 or less, can fully deduct their federally taxed benefits when they file their taxes.
Connecticut follows a policy similar to Colorado when it comes to exemptions. Single tax filers, as well as married individuals filing separately, are not required to pay taxes on their benefits if their adjusted gross income (AGI) is below $75,000. Similarly, married couples filing jointly with an AGI below $100,000 are also exempt from taxes on their benefits.
In Minnesota, residents have the benefit of an exemption from paying taxes on their Social Security benefits. If you are married and your adjusted gross income (AGI) is below $105,380, or if you are an individual with an AGI below $82,190, you will not have to pay any taxes on your Social Security benefits.
This exemption provides a financial advantage for retirees and helps to ensure that they can fully enjoy the benefits they have earned throughout their working years.
If you are a Social Security recipient, you can benefit from tax deductions on all of your benefits. For single filers with an adjusted gross income (AGI) below $25,000 and joint filers with an AGI below $32,000, these deductions apply.
In New Mexico, individuals receiving Social Security benefits and earning less than $100,000 annually, as well as married couples with incomes below $150,000, no longer have to pay taxes on their benefits.
Rhode Island residents who earn less than $88,950 in adjusted gross income (AGI) have the advantage of being exempt from state taxes on their benefits. This also applies to married couples with AGIs below $111,200.
If you earn less than $30,000 per year as an individual filing taxes in Utah, your Social Security benefits will not be subject to taxation. Likewise, married couples who earn less than $50,000 are also exempt from paying taxes on their Social Security benefits.
Married couples in Vermont who earn less than $65,000 are not required to pay taxes on their Social Security benefits. Similarly, individuals who make less than $50,000 per year are also exempt from this taxation.
West Virginia has recently passed a law to phase out its state income tax on Social Security benefits. However, currently, individuals earning less than $50,000 per year and joint filers earning less than $100,000 are exempt from this tax.
The phase-out process will begin with the 2024 taxes, which will be reduced by 35%. In 2025, the reduction will increase to 65%, and finally, by 2026, there will be no taxes on Social Security benefits in West Virginia.
