By Steven C. Fraser, Esq. | FL Bar No. 625825 | DC Bar No. 460026
Every October the Social Security Administration announces the next year's cost-of-living adjustment, and every October I hear the same two questions from clients in Florida and the District: how much is the raise, and is it true that Social Security is no longer taxed. The first has a clean answer this year. The second has a clean answer too, though not the one the headlines implied.
The 2027 numbers
On October 14, 2026, SSA announced a 3.6 percent cost-of-living adjustment for 2027. The adjustment is set by statute, tied to the increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers from the third quarter of 2025 through the third quarter of 2026.
According to the SSA press release and the 2027 fact sheet:
- Who gets it, and when. Nearly 72 million Social Security beneficiaries will see the increase beginning in January 2027. About 7.3 million people who receive Supplemental Security Income will see their increase on December 31, 2026.
- The average raise. SSA estimates retirement benefits will rise by about $75 a month on average. The estimated average monthly benefit for all retired workers goes from $2,095 before the adjustment to $2,170 after it.
- SSI. The federal payment standard rises from $994 to $1,029 a month for an individual and from $1,491 to $1,544 for a couple. The resource limits stay at $2,000 and $3,000.
- The taxable maximum. The amount of earnings subject to the Social Security portion of payroll tax rises from $184,500 in 2026 to $192,300 in 2027. The Medicare portion still has no limit, and the combined employee rate stays at 7.65 percent.
- The retirement earnings test. If you are under full retirement age for all of 2027 and still working, SSA withholds $1 of benefits for every $2 you earn above $25,560 (up from $24,480). In the year you reach full retirement age, the limit is $67,920 (up from $65,160), SSA withholds $1 for every $3 above it, and only earnings before the month you reach full retirement age count. From that month on, there is no limit.
Two practical notes. First, Medicare premiums are usually deducted from the benefit, so the net increase in your deposit depends on the 2027 Part B premium, which SSA says will be available through the my Social Security Message Center starting in late November. Second, SSA sends a COLA notice showing your exact new amount. If you enroll in paperless notices through my Social Security by November 18, you can see it online in late November; otherwise it arrives by mail in December. Keep it with your tax papers. It is the document that tells you, in writing, what you will receive.
The new $6,000 deduction for taxpayers 65 and older
The 2025 reconciliation law, Public Law 119-21 (commonly called the One Big Beautiful Bill Act; the IRS now refers to the package as the Working Families Tax Cuts), added a new deduction at IRC § 151(d)(5)(C). Its terms are short:
- Amount. $6,000 for each qualified individual. A qualified individual is the taxpayer, if 65 or older by the end of the year, and on a joint return, the spouse, if 65 or older by the end of the year. A married couple who are both 65 or older can deduct $12,000.
- Years. The IRS applies it beginning with 2025, and the statute ends it for taxable years beginning after 2028. That is four tax years: 2025, 2026, 2027, and 2028.
- Phase-out. The $6,000 is reduced by 6 percent of modified adjusted gross income above $75,000, or $150,000 on a joint return. For a single filer, the deduction is gone entirely at $175,000.
- Social Security number. The return must include the qualified individual's Social Security number. The IRS requires a number valid for employment and issued before the return's due date, including extensions.
- Married couples. A married taxpayer must file jointly to claim it. Married filing separately forfeits the deduction.
- How it is claimed. It is claimed on Schedule 1-A of Form 1040, and it is available whether you itemize or take the standard deduction. It is in addition to the longstanding extra standard deduction for taxpayers 65 and older, not a replacement for it.
Notice what is missing. The deduction has nothing to do with whether you receive Social Security. A 66-year-old who is still working and has not claimed benefits qualifies. A 63-year-old who started benefits early does not.
Why this is not "no tax on Social Security"
The rules that decide how much of a Social Security benefit is taxable are in IRC § 86, and the reconciliation law did not change them. You start with "combined income," which is your modified adjusted gross income plus one-half of your benefits. If that figure exceeds $25,000 ($32,000 on a joint return), up to 50 percent of your benefits can be taxable. Above $34,000 ($44,000 joint), up to 85 percent can be. Those thresholds are fixed in the statute and are not adjusted for inflation.
The senior deduction works at a different point in the return. It does not change how much of your benefit is counted as income. It reduces taxable income after that calculation is done. For many retirees with moderate income, a $6,000 or $12,000 deduction may offset most or all of the tax on their benefits, which is where the slogan came from. For others, it will not. A retiree with a substantial pension, required minimum distributions, or investment income may still pay tax on 85 percent of benefits, and above the phase-out range the deduction disappears.
The COLA interacts with all of this. A 3.6 percent increase in benefits raises combined income, which for some people will push a little more of the benefit into taxable range, and for others near the $75,000 or $150,000 line will slightly reduce the senior deduction. Neither effect is large for most clients. Both are worth knowing before you set your withholding for 2027. If you want federal income tax withheld from your benefit, the IRS form for that request is Form W-4V, submitted to SSA in writing.
This piece addresses federal tax only. Florida has no personal income tax. The District has its own rules for retirement income, and they should be checked separately.
What to do with this
Read your COLA notice when it arrives and file it. Confirm that each spouse's Social Security number is correct on the return, since the deduction depends on it. If you are married, understand that filing separately costs you the deduction. And when someone tells you Social Security is no longer taxed, ask them which section of the Code says so. None does.
A COLA season also brings a wave of fraudulent "benefit adjustment" messages. The real notice comes by mail or through your my Social Security account. If your number has already been misused, I wrote about the new single point of contact at SSA for identity theft victims earlier this month.
Sources: Social Security Administration, "Social Security Announces 3.6 Percent Benefit Increase for 2027" (press release, October 14, 2026); SSA, 2027 Cost-of-Living Adjustment (COLA) Fact Sheet; IRC §§ 86 and 151(d)(5)(C); Public Law 119-21; IRS Publication 554, Tax Guide for Seniors; IRS, "Schedule 1-A, Additional Deductions: What to know about the new form."
Steven C. Fraser is admitted in the District of Columbia (1998) and Florida (2003) and practices in bankruptcy, tax controversy, consumer protection, probate, and related litigation. This article summarizes a public law and published agency guidance. It is not legal advice and it is not an opinion on any particular case.