Social Security Fairness Act and taxes
Hi Terry! I’m a retired elementary school teacher (73 years old and divorced) and am eligible for an increase in my SS due to the passage of this bill into law. Can you talk about how to handle the retroactive payment of possibly $12,000 and the monthly increase as it relates to taxation of SS benefits? Also, will contributing to an IRA with some of that lump sum help decrease my AGI? I’m one of millions in this boat and hope to make wise decisions if/when this happens. I’m affected by both the WEP and GPO’s demise. I believe I’ll be eligible to receive spousal benefits as an ex-spouse who was married for 15 years and remains single. Any insight would be extremely helpful. With fingers crossed and waiting for SS to make this move, I thank you in advance for your advice.
Terry Says
First of all, you’ll get whatever is larger — your own (now not reduced) benefit OR your ex-spouse’s benefit.
You cannot make an IRA contribution based on SS income.
And yes, this one-time payment (for all of 2024 discrepancy) will raise your income, your taxes, and even possibly your Medicare Part B and D premiums!
So don’t spend it all in one place! Save some for taxes that might be due in 2026.
