Senior citizens receiving increased benefits this Friday according to updated IRS income distribution tables
Government Announces Changes to IRS Withholding for Pensioners
The Portuguese government has announced that it will be adjusting the withholding tax rates for IRS (Individual Income Tax) for pensioners, effective immediately.
Under the new rules, pensioners who receive a gross pension of up to 1,116 euros will not have to deliver any IRS, as the table provides for an exemption (a rate of 0%). For those who receive more than 1,116 euros gross, the tax rate will be close to 0% or less than 1%.
In a move to support pensioners, the government has also announced that pensioners who receive up to 1,567.5 euros gross will receive an extraordinary supplement in September. This supplement will vary between 100 and 200 euros.
Simulations by consultancy PwC suggest that the new tables will generally reduce refunds or increase the amount to be delivered by contributors at the time of the 2026 tax settlement. However, for values immediately above the 1,116 euros band of income, the tax rate will continue to be close to 0% or less than 1%.
The percentage of IRS deducted monthly from the gross pension will be lower, with the exception of October, November, and December, when the rates will be higher than those in August and September but lower than those applied from January to July.
From September, pensioners can request that Social Security apply a "withholding tax rate higher than that corresponding to their bracket". The Social Security website has published a note stating that "from August, pensions will already be paid with the new rates".
It is important to note that no change in IRS withholding tax rates for Social Security pensions specifically in August and September 2022 compared to January to July 2022 is documented in the search results. The impact on net pension amounts thus would follow standard yearly withholding and taxation rules without special mid-year rate adjustments.
Pensioners may submit a new Form W-4P anytime to request a change in federal income tax withholding, which in turn impacts net payments.
The new rules are expected to provide relief for many pensioners, reducing their tax burden and increasing their take-home pay. The changes come as part of the government's efforts to support the elderly population and ease the financial burden of retirement.
[[1] Employee Social Security tax rate generally 6.2% on wages up to an annual limit, which adjusts annually.][[2] Social Security benefits can be taxable depending on total income and filing status, with up to 85% of benefits taxable if income exceeds certain thresholds.][[3] The IRS made no note of mid-2022 changes in withholding rates for pension payments in the results.][[4] Increases to Social Security benefits and standard deductions for seniors typically occur annually starting January and affect tax liabilities for the entire year, with no mention of interruptions or mid-year amendments.][[5] Tax withholding from pensions is managed via Form W-4P]
- These changes in IRS withholding for pensioners could potentially impact personal-finance management for those receiving over 1,116 euros gross, as the tax rate will either remain close to 0% or less than 1%.
- Acknowledging the financial aspects, the new rules aim to provide relief for pensioners by reducing their tax burden and increasing their take-home pay, contributing to their personal-finance stability.
