With higher and retroactive Social Security benefits being paid this year to WEP and GPO retirees, members have called the Association wondering what this means to them in terms of potential taxes.
At the outset, we must make it very clear that the Association does not provide tax counseling nor prepare returns. In this article, we are attempting to provide what we believe useful basic information on this important subject. And, we may have more on this in the future. As always, we strongly suggest that members seek professional tax advice on what they should do this year and in the future when
No Mass. Income Tax: As our members living in Massachusetts know, this state does not tax your pension or social security benefits. The WEP/GPO repeal doesn’t change that. If you live in another state with an income tax law, you will have to check with the tax authorities or professionals in that state.
No Impact on 2024 Income Taxes: Even though the higher Social Security benefits will be paid back to January 1, 2024, they will not affect your 2024 federal taxes. Benefits are subject to tax when they’re paid.
So don’t worry about having already filed your 2024 Federal return. And, for those who waited to prepare your return for this year because of the repeal, it’s safe to use the SSA-1099 Form you received in order to complete your 2024 return.
Federal Tax on Social Security: It’s ironic that included with the WEP and GPO and other “negative” provisions in the 1983 Social Security Amendments was the one that required for the first time that if a portion of one’s Social Security benefits may be included in their taxable income. So now decades later, the law is still on the books, possibly taxing a portion of a retiree’s Social Security benefits.
For a portion of a retiree’s Social Security to be subject to federal taxes, it must exceed certain thresholds. For 2024, one-half of a retiree’s Social Security benefits plus all of their other income (i.e., pensions and tax-exempt interest), must exceed $25,000 if single and $32,000 if a couple filing jointly.
Some members may already include a portion of their Social Security as federal taxable income. And, now with the repeal, it’s reasonably expected that more may find a portion of their benefits subject to tax, especially this year (2025).
No question, the federal tax law on this issue can become somewhat complicated, particularly with retroactive payments back to January 1, 2024. Therefore, we again strongly suggest that you retain a tax professional to best determine how you should proceed in 2025 and future years.