Did you know that Social Security and Supplemental Security Income (SSI) benefits for 70 million Americans will increase in 2021? This adjustment ensures that the benefits provided match the rise in the cost of living as measured by the U.S. Department of Labor’s Consumer Price Index (CPI-W), which rises when inflation increases. This change means prices for goods and services, such as groceries and medical costs, on average, are a little more expensive than the year prior. Therefore, the cost-of-living adjustment (COLA) helps to offset these costs.
What is the new Social Security Tax Limit?
The maximum amount of earnings subject to the Social Security tax will increase to $142,800.
The earnings limit for workers who are younger than full retirement age (see Full Retirement Age Chart) will increase to $18,960. The IRS will deduct $1 from benefits for each $2 earned over $18,960. The earnings limit for people reaching their full retirement age in 2021 will increase to $50,520. The IRS will deduct $1 from benefits for each $3 earned over $50,520 until the month the worker turns full retirement age.
There is no limit on earnings for workers who are full retirement age or older for the entire year.
Will I be notified about COLA?
The Social Security Administration will mail COLA notices to recipients of retirement, survivors benefits, disability beneficiaries, SSI recipients, and representative payees. You can also securely obtain the Social Security COLA notice online using the Message Center in your my Social Security account.
If you would prefer to access your COLA notice online instead of receiving the mailed notice, you can log into your account to opt out of a mailed notice by updating your preferences. Alternatively, you can choose to receive a text or email alert when there is a new notice, enabling you to always be in the know about updated benefit information.
When will COLA be in effect?
COLA will begin with benefits payable to more than 64 million Social Security beneficiaries in January 2021. Increased payments to more than eight million SSI beneficiaries will begin on December 31, 2020.
What other tax programs are available?
The U.S. Department of the Treasury offers over 20 different programs to assist eligible citizens with paying their taxes. Some of these programs include:
- The American Opportunity Tax Credit (AOTC) offers a tax credit that can help you pay your education expenses for the first four years of education completed after high school.
- This filing season, the Internal Revenue System (IRS) encourages all taxpayers to check their eligibility for the Earned Income Tax Credit (EITC) by using the EITC Assistant. This is a refundable federal income tax credit for low to moderate income working individuals and families. Once taxpayers find out if they qualify for EITC, they must first file a tax return and claim the credit.
- Another program is the Volunteer Income Tax Assistance (VITA), which is designed to offer tax assistance to people who are generally making $54,000 or less, living with a disability, elderly, or limited English-speaking taxpayers.
These programs, along with all other tax assistance programs from the U.S. Department of Treasury, can be found on their agency page on Benefits.gov.
Where else can I look for additional tax assistance?
To read more about available tax assistance, check out our article, “Take Time for Taxes: Use IRS Resources to Prepare for Tax Season.” The IRS can also help you locate a Free Tax Prep and find IRS-certified volunteers who can assist you with your tax return preparations.
Take the stress out of tax season by starting early. Take the Benefit Finder questionnaire to see which benefit programs you may be eligible to receive. To find more tax-related programs, including information about various tax credits and taxpayer assistance programs, browse the Financial Assistance category and filter by the ‘Tax Assistance’ subcategory. For further details and information, visit IRS.gov.
