Your Social Security Checks Could Get a Huge Boost in 2027. How That Could Affect You if You Live in 1 of the 8 States That Taxes Benefits.
Key Points
Your Social Security benefits may get an above-average boost next year thanks to the cost-of-living adjustment.
This could increase your risk of owing federal Social Security benefit taxes.
If you live in one of the eight states that taxes benefits, you could also pay more at the state level next year.
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Your Social Security checks will get a boost in 2027, and it could be a substantial one based on the latest cost-of-living adjustment (COLA) estimates. Recent projections from The Senior Citizens League (TSCL), a nonpartisan senior group, estimate the COLA at 3.9%, which would add about $81 to the average monthly benefit as of April 2026.
That said, the extra cash may not have the positive effect you're hoping for. Higher COLAs appear alongside high inflation, and they can also open the door to more taxes. This risk is especially significant for those who live in one of the eight states that tax some of their seniors' benefits.
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Why a large Social Security COLA could lead to more taxes for you
COLAs increase your monthly Social Security checks, but they also increase your provisional income. This is your adjusted gross income (AGI), plus nontaxable interest from municipal bonds, and half your annual Social Security benefit. The federal government uses this number, along with your marital status, to determine what percentage of your Social Security checks are taxable.
The table below breaks this down:
|
Marital Status |
0% of Benefits Taxable If Provisional Income Is Below: |
Up to 50% of Benefits Taxable If Provisional Income Is Between: |
Up to 85% of Benefits Taxable If Provisional Income Exceeds: |
|---|---|---|---|
|
Single |
$25,000 |
$25,000 and $34,000 |
$34,000 |
|
Married |
$32,000 |
$32,000 and $44,000 |
$44,000 |
Data source: Social Security Administration.
These thresholds are pretty low, and they're not indexed to inflation. Your Social Security COLA and increased spending due to rising living costs might be all it takes to make 85% of your benefits taxable.
But that's not all.
Why you could owe more money at the state level, too
Your federally taxable Social Security benefits get added to your AGI. Many of the eight states that still tax Social Security -- Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont -- look at your federal AGI when deciding whether your benefits are taxable at the state level. But each state has different rules.
For example, Connecticut exempts its residents from state Social Security benefit taxes if their federal AGI is under $75,000 for single adults or $100,000 for married couples. But these numbers are just $55,000 and $70,000, respectively, for Vermont residents.
If more of your Social Security benefits are taxable at the federal level, your higher AGI could increase your risk of owing state Social Security benefit taxes as well. How much you'd owe depends on your AGI and your state's income tax rate.
It's not always possible to avoid state benefit taxes, so the next best thing is to plan for them. Once we know the official 2027 COLA, consult with an accountant in your state to learn whether you could owe state benefit taxes next year and how much they could be.
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