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In 2026, approximately 75 million Americans will receive a 2.8% cost-of-living adjustment to Social Security and Supplemental Security Income benefits.
The increase is expected to increase Social Security retirement benefits by an average of $56 per month, according to the Social Security Administration.
But other changes, especially new tax credits for seniors and Medicare Part B premium rates, will affect the final amount retirees will receive in their monthly checks starting in January.
Starting in early December, the Social Security Administration will send recipients a one-page statement showing the “exact dates and amounts” of their new monthly benefits and deductions for 2026, the agency said.
Cost of Living Adjustment Notices will be available online for beneficiaries with My Social Security accounts starting Nov. 12, and all notices will be available online by Dec. 12, an SSA spokesperson said. Paper statements will be sent by mail starting Dec. 1, and all beneficiaries are expected to receive their statements by the end of December, the spokesperson said.
To take full advantage of the inflation adjustment, beneficiaries should consider how the changes will affect their monthly checks in 2026.
New senior citizen “bonus” aims to reduce taxes on benefits
Social Security benefits are still subject to federal tax based on your income.
However, a bill passed in July would provide a senior “bonus” of up to $6,000 to eligible individuals age 65 and older to curb these taxes.
Because the $6,000 is provided through deductions, most retirees won’t notice the change until tax filing season. Eligible individuals will not necessarily receive a $6,000 refund.
“It’s not like you can save dollars dollar for dollar like you can with credit,” says Andrew Herzog, a certified financial planner and registered agent with Watchman Group in Plano, Texas. “How much you actually save depends on a case-by-case basis.”
Notably, not everyone is eligible for the new senior citizen exemption. The phaseout begins for individuals earning $75,000 and couples earning $150,000. Singles with incomes of $175,000 and married couples with incomes of $250,000 will not benefit from this change, according to the Urban-Brookings Tax Policy Center.
The Urban-Brookings Tax Policy Center estimates that the biggest beneficiaries will be seniors with annual incomes of between $80,000 and $130,000, who would see an average tax cut of about $1,100.
Joseph Rosenberg, a senior fellow at the Urban-Brookings Tax Policy Center, said the change may benefit some beneficiaries less than expected, especially if they have low incomes and don’t pay much in taxes to begin with.
Existing federal tax rules remain in effect with respect to Social Security benefits. Benefits may be taxed based on the sum of the beneficiary’s total or adjusted gross income, tax-free interest income, and one-half of the annual Social Security benefit.
Up to 50% of benefits are taxable if the individual’s total income is between $25,000 and $34,000, and up to 85% if the individual’s total income is over $34,000.
For married couples filing jointly with combined income between $32,000 and $44,000, up to 50% of their Social Security benefits are taxed, and up to 85% for income over $44,000.
Beneficiaries can plan for these taxes by requesting that taxes be withheld from their monthly payments. You can choose a withholding rate of 7%, 10%, 12%, or 22%.
The new senior citizen credit could reduce some taxpayers’ tax liability in 2026, meaning it may make sense to withhold less on benefits and other income, said Ron Johnson, a certified financial planner and wealth planner at Baird.
“It’s going to require some math to get it right,” Johnson said.
For example, a tax professional may use your past tax payments and estimated tax payments for 2026 to find a target percentage to withhold from Social Security, he said.
Johnson said the new senior tax deduction will go into effect in 2025, but adjustments based on the changes will be made later this year.
Medicare Part B premiums increase by nearly 10%
To cover medical services, Medicare Part B’s new 2026 premiums will take an even larger share of beneficiaries’ checks in 2026.
The standard monthly premium for Part B will rise 9.7% to $202.90 in 2026 from $185 in 2025, making it the second-highest increase in the program’s history, said Mary Johnson, an independent Social Security and Medicare analyst. This rate applies to individuals with annual incomes of $109,000 or less in 2024 and married couples filing taxes jointly with incomes of $218,000 or less.
Individuals and couples with modified adjusted gross incomes above these thresholds will pay higher Medicare Part B premium rates. This is due to what is called the Income-Related Monthly Adjustment Amount, or IRMAA.
Medicare Part B premiums are typically deducted directly from Social Security benefit checks, which can reduce the cost-of-living increases that beneficiaries see in their monthly payments.
However, the Hold Harmless Clause prevents Medicare Part B premiums from completely wiping out a beneficiary’s COLA. But some beneficiaries are excluded from that protection, including newly retired workers and people with incomes above standard premiums, according to the Coalition for the Elderly, a nonpartisan seniors’ group.
Beneficiaries whose income has decreased, especially because of a life-changing event, can notify the Social Security Administration of the change to have their Part B contribution rates adjusted.
This year’s contribution rates are based on your modified adjusted gross income, usually from your most recent tax returns for the past two tax years.
Selling your home before retirement can potentially increase your later Medicare premiums, so it’s wise to plan how your tax basis will affect your later retirement spending, Herzog said.
“The emphasis on tax planning is becoming more and more common today,” Herzog said. “Clients with advisors need to get into the weeds.”
Medicare open enrollment ends December 7th
Social Security recipients may also have Medicare Part D prescription drug coverage or other premiums for private Medicare Advantage insurance deducted from their monthly checks.
Unlike Medicare Part B, Medicare Advantage and Part D deductions do not have a hold-harmless clause, Johnson said. As such, these premiums could reduce Social Security benefits, she said.
Medicare beneficiaries have until Dec. 7 to shop around for coverage, which could help lower their medical bills in 2026.
During this period, beneficiaries can switch from Original Medicare, including Parts A and B, to Medicare Advantage and vice versa. Change your Medicare Part D prescription plan. Or, you can choose another Medicare Advantage plan that may or may not include drug coverage.
The Medicare Advantage open enrollment period from January 1 to March 31 allows beneficiaries to switch Advantage plans or drop their original Medicare Advantage plan. Special enrollment periods may be available throughout the year depending on your individual circumstances.
But it’s during this annual enrollment period that beneficiaries have the most flexibility, said Ryan Ramsey, associate director of the National Council on Aging. Specifically, he said, anyone can now compare their standalone Part D plan or Medicare Advantage drug coverage to see if it fits their needs and has the lowest cost for the coming year.
“If you have any form of Medicare coverage, you should do a comparison every year at this time,” Ramsey said. “This is always a good habit, even if you don’t plan on changing your plans.”
