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Understanding the new Social Security Fairness Act
The Street
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2/22/2025
The new Social Security Fairness Act makes big changes to benefits for workers who get pensions. Lisa Greene-Lewis, TurboTax expert and CPA, explains.
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Sports
Transcript
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00:00
We're calling all public service workers.
00:08
There is a new Social Security Fairness Act in town that was signed by the former president,
00:13
and you need to know about it because it's going to affect your tax return.
00:16
Lisa Green Lewis, TurboTax expert and CPA is here with us to explain everything.
00:20
I love how he got this in under the gun, but at least it's a good thing for workers out
00:25
there, right?
00:26
Yes.
00:27
It eliminates the windfall elimination provision and the government pension offset.
00:33
So what those did, if these workers like firefighters, police officers, if they paid into a pension,
00:42
which they typically do, but also had a job that paid into Social Security, they were
00:48
getting a lower benefit.
00:50
But what this Social Security Fairness Act does, it eliminates those provisions and allows
00:57
them to get the full benefit.
01:00
That's amazing actually, and probably high time.
01:03
So now how, so this will affect their 2024 tax return.
01:07
So what do they need to know when they start to fill things out?
01:10
How does this affect their bottom line?
01:12
Yes.
01:13
So two things that this Social Security Fairness Act did.
01:19
One of them is they're going to get retroactive pay to January 1st, 2024.
01:25
So they're going to get a lump sum payment.
01:27
And then the second thing it's doing is it's increasing their monthly Social Security.
01:33
So the tax implications of that on the lump sum payment, that could make the rest of their
01:41
Social Security taxable, because there are thresholds at which your Social Security is
01:47
taxable when you're getting other income, like a pension.
01:51
So it could possibly make that entire amount taxable.
01:57
And then you had mentioned their full benefits.
01:59
So their benefits will go up.
02:00
So that also could affect the taxability, right?
02:03
Yes.
02:04
That's something they need to consider.
02:05
Right.
02:06
So when they're doing their tax returns, they have to be super careful about this.
02:09
So now how do they figure this out?
02:11
Do they have to crunch these numbers?
02:13
Who's figuring out these numbers for them?
02:18
With TurboTax, we automatically figure it out for you based on what income you put in,
02:24
when you put in the Social Security and your other streams of income.
02:28
It's automatically figured out for you.
02:31
Or you can just hand your taxes over to our TurboTax Live full service experts so you
02:36
don't have to worry about it.
02:38
But basically, they don't have to sit down pen and pencil and try to figure out how much
02:43
their lump sum payment should be.
02:44
No one out there is going to do this for them.
02:47
Right.
02:48
But they can if they want to know ahead of time.
02:52
So it goes by your combined income.
02:54
And combined income is your other income that you receive, like from your pensions, then
03:02
half of Social Security.
03:05
And then depending on what that number is, a certain percentage of your Social Security
03:10
is taxed.
03:11
Up to 85%.
03:13
All right, Lisa, this all sounds great and our police officers and firefighters deserve
03:18
this increase.
03:19
But when can they actually expect to see money in their wallets and which tax return does
03:24
this start to affect?
03:27
So there's talk of it going out the end of December of 2025.
03:32
But then there has been mention of delays in that.
03:36
And then as far as when you claim it, so if you did receive it in December 2025, you would
03:42
claim it in on your 2025 taxes, but you also can have a choice.
03:48
If your income was lower in 2024, you could claim it in that year.
03:54
You're able to make a decision on which year you want to claim it in.
03:59
OK, so not surprising, Social Security is complicated.
04:02
Make sure you get some help.
04:03
But it's in the news.
04:04
It'll be talked about.
04:05
So pay attention.
04:06
Lisa Greene-Lewis, CPA and TurboTax expert, thank you for clarifying all that.
04:11
Thank you for having me.
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