Many people feel a sense of relief upon retirement. They no longer need to work long hours, worry about finding a job that pays a certain wage or offers specific benefits. Their finances are perhaps simplified, consisting of Social Security retirement benefits, a pension, and a retirement account or two. They may also have fewer bills to pay if their home and vehicles are paid off. Changes to Social Security, and specifically the 2023 Social Security earnings limit, may raise questions for many retirees as well as those who are considering retiring in 2023. From how much your benefits may be to whether you will pay taxes on those benefits, an experienced Social Security benefits attorney with Bruce L. Weider, PC at (734) 485-0535 are ready to listen to your situation and help you understand your options.
What Changes Will Happen to Social Security Benefits in 2023?
There are several changes happening to Social Security benefits in 2023. These changes include:
- 2023 will see an 8.7% cost-of-living adjustment (COLA) to the monthly benefit amount, compared to just 5.9% COLA in 2022. This is also the biggest change in 40 years.
- This year’s changes will also raise the maximum monthly payout at full retirement age to $3,627, which is an increase of $282 from 2022. Additionally, retirees still get an extra 8% of the benefit amount per year if they wait past full retirement age, up to age 70, before collecting benefits.
- The 2023 Social Security earnings limit for working while getting benefits has increased to up to $21,240 if collecting before full retirement age (an increase of $1,680), and up to $56,520 if collecting at full retirement age or beyond (an increase of $4,560). Earning more than the specified amount results in a reduction of benefits by $1 for every $2 earned before full retirement age or $1 for every $3 earned at full retirement age or beyond.
- Maximum taxable earnings increased from $147,000 in 2022 to $160,200 in 2023.
- Disabled workers also get the 8.7% COLA increase and the amount they can earn without losing Social Security Disability Insurance also increased.
- Workers must now earn $1,650 to get 1 Social Security credit, which is an increase of $130 from 2022. Workers must earn 40 credits to be eligible for benefits.
- Medicare Part B premium is now $164.90, which is a decrease from $170.10 in 2022. The deductible has also decreased from $233 in 2022 to $226 in 2023.
What Income Counts Toward Social Security Earnings Limit?
When filing taxes with the Internal Revenue Service (IRS), it is important to list every source of income, regardless of where or what it is. However, Social Security does not look at income the same way. Social Security considers wages from a job or the net profit if the individual is self-employed as income. This also includes commissions, bonuses, and vacation pay.
Social Security does not consider pensions, annuities, interest, investment income, veteran’s benefits, or other government or military retirement benefits as income for the 2023 Social Security earnings limit. If you have an income source and are uncertain whether Social Security would consider it income, Bruce L. Weider, PC may be able to help.
How Much of Social Security Benefits Are Taxable in 2023?
The IRS does not tax Social Security benefits the same way it taxes wages earned from a job or money earned from self-employment. At most, a retiree may pay taxes on 85% of their Social Security benefits, based on IRS rules. If retirees expect to pay taxes on their Social Security benefits, they can either make quarterly estimated payments or opt to have federal tax withheld from their benefits.
While each individual’s situation is unique and may require different amounts, taxes on Social Security benefits are typically:
- Filing as an individual: If the combined income per Social Security Administration guidelines is between $25,000 and $34,000, retiree may pay taxes on up to 50% of benefits. If income is more than $34,000, they may pay taxes on up to 85% of benefits.
- Filing jointly with a spouse: If the combined income is between $32,000 and $44,000, retirees may pay taxes on up to 50% of benefits. If income more than $44,000, they may pay taxes on up to 85% of benefits.
- Married filing separately: In this case, most retirees will pay taxes on all of their benefits, regardless of the income amount.
What Are the New Social Security Rules for 2023?
There are several new rules for Social Security in 2023. Most affect disability benefits rather than retirement benefits, but knowing the new rules may still be important, particularly if you are collecting disability benefits and will be reaching full retirement age this year, when disability benefits automatically change to retirement benefits.
The new Social Security rules for 2023 include:
- The Substantial Gainful Activity (SGA) amount for individuals with disabilities other than blindness is now $1,470 per month. For individuals with blindness, the SGA threshold is now $2,460 per month.
- The Trial Work Period (TWP) monthly earnings amount is now $1,050.
- The Supplemental Security Income (SSI) Federal Benefit Rate (FBR) is now $914 for individuals and $1,371 for couples each month.
- The Student-Earned Income Exclusion (SEIE) amount for students who are under age 22 and receive SSI benefits is now $8,950 per year.
- Medicare Part A Hospital Insurance’s base premium is now $506, and the 45% reduced premium is $278.
- For individuals with disabilities, the Medicaid While Working State Threshold Amounts have been increased. This amount varies by state and can be found on the SSI Only Employment Supports page.
Get Help From a Social Security Benefits Attorney
Whether you are just getting ready to begin collecting Social Security retirement benefits or are already receiving them, the 2023 Social Security earnings limit or other changes may raise questions for you. Understanding the benefits you are or will be receiving, how they are impacted by changes, and what their tax implications may be, is important to ensuring that you receive the maximum benefit available to you. If you have questions about applying for benefits with these changes or how these changes affect your existing benefits, the knowledgeable attorneys with Bruce L. Weider, PC may be able to assist you. Call our office today at (734) 485-0535 to schedule your personal consultation.