“This caught retirees off guard”: One group will be forced to repay COLA increase in just 8 weeks

A new year means a new COLA and new taxes to be paid. With January officially in the rearview mirror, the start of February means that tax season has officially started, with January 26 being the opening date for citizens to file their income taxes to the Internal Revenue Service (IRS). However, while tax season is not a period most look forward to, it does also bring with it increases in Social Security payments, which most, if not all, recipients are not disappointed by. 

New tax deductions for 2025/2026

The opening of the tax year is with regard to the fiscal year 2025/2026 and includes some changes compared to other years. This year, taxpayers will use the new Schedule 1-A form to claim recently enacted tax deductions, such as for the ‘No Tax on Tips’ legislation passed last year. Under the new legislation, eligible tipped workers can deduct up to $25,000 earned from tips annually from their taxable income. 

Other new deductions approved last year include a new deduction for seniors aged 65 and above, whereby single filers can deduct up to $6,000 from their taxable income, while married couples filing jointly can deduct up to $12,000. However, this tax break phases out at a 6% rate on seniors with an annual income over $75,000 for single filers and $150,000 for joint filers, and caps out at $175,000 and $250,000, respectively.

For this year’s tax filing, the following tax brackets are to be adhered to:

• 10%: Taxable income up to $11,925 for single filers and $23,850 for married couples filing jointly 
• 12%: Taxable income over $11,925 for single filers and $23,850 for married couples filing jointly 
• 22%: Taxable income over $48,475 for single filers and $96,950 for married couples filing jointly 
• 24%: Taxable income over $103,350 for single filers and $206,700 for married couples filing jointly 
• 32%: Taxable income over $197,300 for single filers and $394,600 for married couples filing jointly 
• 35%: Taxable income over $250,525 for single filers and $501,050 for married couples filing jointly 
• 37%: Taxable income over $626,350 for single filers and for $751,600 married couples filing jointly 

10 weeks until this deadline passes

In addition to the new tax deductions relevant for this year, the new cost-of-living adjustment (COLA) statistic went into effect for 2026 Social Security payments, whereby all Social Security recipients saw their payments increase by 2.8%, according to an official statement from the SSA about the COLA increase for 2026.

However, while the increase in income is sure to bring much relief to beneficiaries, they may still have to pay tax on this new income increase if eligible, as the start of the new year makes up the backend of the 2025/2026 fiscal year. If you are eligible to file, the deadline to file or request an extension on your taxes is 10 weeks away, on April 15. 

Check to see when you can expect your payments 

For some SSA beneficiaries, this might be the first year that they are set to receive their payments from the SSA. There are three funds that beneficiaries can qualify for, namely: Retirement benefits, SSI benefits, and Disability benefits. Each of these has its own qualifying criteria, with some beneficiaries eligible to receive payments from more than one of these funds. 

New beneficiaries should take note that these benefits increase every year thanks to COLA. There is no other way for SSA benefits to be increased once you claim them, except for when COLA is applied at each new year. The statistic is announced generally in October of the preceding year. The intention behind COLA is to ensure that recipients’ benefits are able to keep up with the rising costs of inflation so that they retain the same buying power year-on-year. This year’s COLA sits in the average range of what is usually applied.

Disclaimer: This content is informational only and does not supersede or replace the SSA’s or IRS’s own publications and notices. Always verify any specific dates and amounts by following the direct links in our article to SSA.gov or IRS.gov, or by consulting your local SSA field office or tax professional.