Increasing the monthly checks by the 2.8% Cost-of-Living Adjustment (COLA) in 2026 will be an added benefit, yet there is a tax risk. Although the benefits are on the rise, the federal income levels that prompt the taxes to be paid on the Social Security have not been changed in decades. This so-called bracket creep will result in many retirees having a greater percentage of their payment, as adjusted by COLA, in the tax bracket than previously. It is important to know how this modest increase will impact on your overall taxable income to plan your financial life in 2026.
The 2026 COLA and Taxable Thresholds
The 2.8 percent growth increases the monthly benefit of retired employees to about 2,071. Nevertheless, the taxable amounts set by IRS on these benefits are still pegged at 25,000 individuals and 32,000 joint filers. As these limits are not indexed to inflation, a small increase in the COLA would cause a senior to exceed the combined income limit. There is a chance that once you have crossed these lines, 50 percent or 85 percent of your Social Security benefits may be taxable at your ordinary income rate.
Computing Your Taxable Income
In order to determine whether or not your 2026 benefits are taxable, you need to compute your Combined Income. The formula will include your Adjusted Gross Income (AGI), any tax-exempt interest, and precisely a half of your Social Security benefits. With a result over the 25,000 or32,000 threshold, then you will most certainly pay federal tax. You should consider computing this calculation early in the year to determine whether an increase in your new COLA-adjusted amount changes your tax bracket.
The OBBBA New Deductions
One of the biggest changes of 2026 is the One Big Beautiful Bill Act (OBBBA) to introduce a new Senior Bonus Deduction. The taxpayers who are eligibles of 65 years or above are now entitled to deduct an extra 6,000 (individual) or 12,000 (joint) of their taxable income. Although this does not affect the calculation of the Social Security itself, it decreases your total tax bill. This deduction is a life-saving device to assist retirees in neutralizing the effect of the 2.8 percent COLA and retain greater part of their monthly raise.
State-Level Tax Exemptions
There is also a change in state tax environment in 2026. The state of West Virginia has officially ended its phase-out, becoming the 42 nd state (as well as the District of Columbia) to no longer tax Social Security benefits. Nonetheless, there are still eight states that tax your checks somehow. In case you are a resident of such states as Connecticut, Minnesota, or Utah, you are to verify your own income limits. Most of these states provide complete exemption to low- to middle-income seniors, but the income, or rather income, cliffs vary widely depending on the region.
Controlling Withholding on a Voluntary Basis
In the case where 2026 COLA renders your benefits taxable, to avoid being caught by a surprise bill, you should establish voluntary tax withholding. You can withhold 7, 10, 12 or 22 per cent of your monthly check to the Social Security Administration by filling Form W-4V. This will guarantee that your tax payment is paid all year long. By doing so proactively, you can have the benefits of a raise in your cost of living and not be concerned with penalty IRS actions and making a huge payment the next April.
Data Overview
| Tax Detail | Individual Filer | Joint Filers |
| 0% Tax Threshold | Under $25,000 | Under $32,000 |
| Max Benefit Taxed | Up to 85% | Up to 85% |
| New 2026 Deduction | $6,000 (if 65+) | $12,000 (if 65+) |
| States Still Taxing | 8 States | 8 States |
FAQs
1. Will my 2.8 percent COLA automatically increase my taxes?
You can get a raise without it becoming necessary to push your income above the $25,000 (single) or the $32,000 (joint) federal income cap. There is a high number of retirees who remain under such limits and do not pay any tax.
2. What is the effect of the Senior Bonus Deduction?
It reduces your total taxable income by 6000 dollars or 12000 dollars. This will save you on your overall amounts of tax, despite some of your Social Security benefit being technically taxable.
3. In 2026, what states would continue taxes on the Social Security?
The other states include Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah and Vermont. Majority of them provide exemptions on low and moderate income seniors.
Disclaimer
The information below is informational. IRS.gov or SSA.gov are the sites to visit to get official tax rules and the latest forms.
