A new law eliminating Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) could boost millions of Americans’ Social Security benefits, but also means they may have to pay more taxes. The Social Security Fairness Act affects about 3.2 million public-sector retirees who receive pension income.
Starting January 2024, beneficiaries may receive a one-time retroactive payment, which could amount to thousands of dollars and higher monthly benefits. However, this increase in benefits can trigger more taxes. Experts say the tax burden won’t be immediate and people have about a year before they need to pay.
The tax rate depends on the total income, including tax-exempt interest and one-half of Social Security benefits for the taxable year. Up to 85% of benefits can be taxed depending on how much combined income is over a certain base amount. The base amounts vary by filing status.
To minimize taxes, experts suggest allocating excess funds to previous years, making qualified charitable distributions from IRAs, reducing withdrawals from retirement accounts, and investing in small businesses or savings goals. It’s essential to consider overall income tax brackets and Medicare premiums when making financial decisions.
Source: https://eu.usatoday.com/story/money/personalfinance/2025/03/04/social-security-fairness-act-taxes/80579609007