Social Security pensioners will be the first taxpayers to feel the effect of the new withholding tables, which start to be applied this month, with this change coming on top of the interim increase of 3.57% in pensions.
Social Security pensioners receive their pensions this Monday, which have already been processed under the rules of the new IRS withholding tables, which, unlike the ones in force until now, operate on a similar logic to that used for the annual calculation of the tax.
For many pensioners, the new withholding model will result in a reduction of the tax that is paid monthly (in the form of an advance). Thus, a pensioner (unmarried) with a pension of 1,200 euros gross would receive a net value of 1,050 euros, after removing the withholding at the rate that has been applied until now.
With the new IRS table, this 1,200 euro gross pension would now deduct 130.89 euros in taxes, resulting in a net value of 1,069.11 euros (19 euros more than in previous months).
However, July is also the month in which pensioners (with pensions of up to 12 Social Support Indexes – IAS) will receive the interim increase of 3.57%, which will mean that this pensioner will have a pension of 1,242.84 euros gross.
Combining this increase with the new withholding tables, this pensioner will now receive 1,100 euros net, that is, 50 euros more than the amount he received in June.
This increase in monthly net income will result, however, for many people in a smaller IRS refund in about a year’s time, since some of it is a result of the reduced tax paid each month.