Current:Home > NewsHow inflation will affect Social Security increases, income-tax provisions for 2024 -Pinnacle Profit Strategies
How inflation will affect Social Security increases, income-tax provisions for 2024
View
Date:2025-04-18 20:23:20
Inflation has cooled in recent months, but there's still enough in the pipeline to affect Social Security benefits, some income-tax provisions and other items that can affect your budget.
As planning comes into focus for 2024, here are some issues to watch, plus a few other tax reminders.
Social Security increases to cool off
The Social Security Administration announced a COLA, or cost-of-living adjustment, of 8.7% for 2023, but the increase for 2024 might not be even half that much.
The COLA hike for 2023 was the biggest in more than 40 years and reflected an inflationary surge. But the Federal Reserve rate's hikes over the past two years have helped to crimp inflation, so the upcoming COLA for 2024 won’t be as high, probably in the low 3% range.
Protect your assets: Best high-yield savings accounts of 2023
The Social Security Administration won’t make the announcement until mid-October, as the agency must await the latest inflation numbers for September.
Social Security COLAs are based on the change in CPI-W, or the Consumer Price Index for Wage Earners and Clerical Workers, from the third quarter of one year to the third quarter of the next. Barring any inflationary surge or surprise drop this month, the COLA increase likely will be between 3 and 3.5%.
The average monthly Social Security retirement benefit is currently around $1,792, so an increase in the range of 3 to 3.5% would add $54 to $63 a month.
More:Phoenix, long the nation's inflation hot spot, no longer ranked No. 1
Tax bracket, standard deduction updates
More than five dozen federal tax provisions change each year owing to inflation. The adjustments aim to prevent "bracket creep," which is pushing taxpayers into paying higher marginal tax rates due to inflation rather than any increase in real income, noted the Tax Foundation in a recent summary.
There are seven federal income brackets for individuals in 2023, the same as for 2022, though the dollar amounts in each bracket will be slightly higher, the group said. The tax rates for 2023 are 10%, 12%, 22%, 24%, 32%, 35% and 37%.
The standard deduction for 2023 rises to $13,850 (singles) and $27,700 (married filing jointly). Those numbers are up $900 and $1,800, respectively, from 2022.
Tax rates on long-term capital gains stay at 0%, 15% and 20%, but the dollar amounts adjust slightly higher. The 15% rate, for example, applies for single taxpayers with taxable income between roughly $44,625 and $492,300, or $89,250 to $553,850 for married couples filing jointly.
Amounts for the Earned Income Tax Credit also are a bit higher — $560 for lower-income taxpayers with no children, $3,995 for those with one child, $6,604 for two children and $7,430 for three children or more.
Tax collections rising with inflation
Inflation has eased over the past year but possibly not enough to slow federal tax collections all that much.
They hit a record high of $4.9 trillion in the fiscal year that ended Sept. 30, 2022, the Tax Foundation reported at the time. That came on the heels of a prior record of just over $4 trillion for the prior fiscal year. The Congressional Budget Office will provide an update for the current year in coming weeks.
Of that $4.9 trillion through last September, individual income tax collections surged 29% to $2 trillion, with corporate collections up 14% and payroll taxes rising 13%. The spike in individual collections was likely greased by rising capital gains from booming home prices and a strong stock market, the Tax Foundation said.
Federal tax collections in the most recent fiscal year came in at 19.6% of Gross Domestic Product, the Tax Foundation noted. The record was 20.5% in 1943, during World War II.
No more unannounced visits by IRS agents
Another tax-related change, though not one that isn’t waiting to take effect next year and is certainly not influenced by inflation, is an end to pop-in visits by IRS revenue officers to homes and businesses.
The new policy, which took effect in July, aims to reduce public confusion and enhance safety for taxpayers and IRS employees.
The change reverses decades-long practices by IRS revenue officers, who are unarmed, making unannounced visits to collect unpaid taxes, help taxpayers submit unfiled returns and more. Instead, the IRS now is mailing letters to schedule meetings.
"Changing this long-standing procedure will increase confidence in our tax administration work and improve overall safety for taxpayers and IRS employees,” IRS Commissioner Danny Werfel said in a prepared statement.
Revenue officers routinely faced threats and other hazards with unannounced visits.
The National Treasury Employees Union, which represents many IRS workers, backed the new policy. "This decision will help protect those whose jobs have only grown more dangerous in recent years because of false, inflammatory rhetoric about the agency and its workforce,” said Tony Reardon, national president of the union, in a statement.
According to Werfel, the increase in the number of scam artists bombarding taxpayers also increased confusion about home visits. Such crooks showing up at someone's door can confuse local law enforcement officers, too.
Reach the writer at [email protected].
veryGood! (55)
Related
- This was the average Social Security benefit in 2004, and here's what it is now
- Jurors convict Alabama woman in 2020 beating death of toddler
- Stock market today: Asian shares mostly decline ahead of Federal Reserve’s Powell speech
- New gas pipeline rules floated following 2018 blasts in Massachusetts
- McKinsey to pay $650 million after advising opioid maker on how to 'turbocharge' sales
- The rise of Oliver Anthony and 'Rich Men North of Richmond'
- India and Russia: A tale of two lunar landing attempts
- Former residents of a New Hampshire youth center demand federal investigation into abuse claims
- The Best Stocking Stuffers Under $25
- Mets to retire numbers of Darryl Strawberry, Dwight Gooden, who won 1986 World Series
Ranking
- Biden administration makes final diplomatic push for stability across a turbulent Mideast
- New York governor urges Biden to help state with migrant surge
- For Trump, X marks the spot for his social media return. Why that could really matter
- Pregnant Kourtney Kardashian Shares Look at Bare Baby Bump While Cuddling Up to Travis Barker
- Nevada attorney general revives 2020 fake electors case
- 3 dead, 6 injured in mass shooting at Southern California biker bar, authorities say
- Former Indiana postal manager gets 40 months for stealing hundreds of checks worth at least $1.7M
- Man accused of beating goose to death with golf club at New York golf course, officials say
Recommendation
Google unveils a quantum chip. Could it help unlock the universe's deepest secrets?
Zimbabwe’s election extends to a second day after long ballot delays. Some slept at polling stations
Patricia Clarkson is happy as a 63-year-old single woman without kids: 'A great, sexy' life
Prosecutors seek plea hearings for 2 West Virginia jail officers accused in inmate’s death
Highlights from Trump’s interview with Time magazine
Terry Funk, WWE wrestling icon, dies at 79
Ed Sheeran has an album coming 4 months after his last: What we know about 'Autumn Variations'
The Blind Side Producers Reveal How Much Money the Tuohys Really Made From Michael Oher Story