• Nearly 3 million Americans are poised to see bigger Social Security benefit checks.
• For some, that could trigger larger tax bills and Medicare premium payments, experts say.

Nearly 3 million individuals are poised to see their Social Security benefits increase, thanks to new changes signed into law by President Joe Biden this week. But with the higher checks could come additional tax burdens.

The Social Security Fairness Act — which passed by a bipartisan majority in both the House and Senate — ends reductions of Social Security benefits for certain individuals who also receive pension income from work in the public sector as firefighters, police officers, teachers and local, state and federal employees.

Those beneficiaries are set to see an increase to their monthly benefit checks. Because the legislation applies to benefits paid throughout 2024, they will also receive lump-sum payments to make up for that time.

The details of how those increases will be implemented are now being determined, according to the Social Security Administration.

In total, the benefit increases will cost $196 billion over a decade, according to the Congressional Budget Office. The additional outlay will move Social Security's trust fund depletion dates six months closer. The program's combined trust funds may pay full benefits until 2035, at which point just 83% of scheduled benefits may be payable, the program's trustees projected last year.

How Social Security benefits may change

About 2.1 million beneficiaries — those who were affected by the Windfall Elimination Provision, or WEP — may see $360 more in monthly benefits on average, according to CBO estimates as of December 2025. The WEP, which has now been eliminated, reduced Social Security benefits for workers who also had pension or disability benefits from jobs where they did not pay Social Security payroll taxes.

More from Personal Finance:
Biden signs Social Security Fairness Act
Big changes to expect from Social Security and Medicare in 2025
73% of workers worry Social Security won't be able to pay benefits

Additionally, about 380,000 spouses would see average monthly benefit increases of $700 and 390,000 surviving spouses would see an average of $1,190 more, according to CBO's estimates for December 2025.

Those beneficiaries were affected by the now-defunct Government Pension Offset, or GPO, which reduced Social Security benefits for spouses, widows and widowers who also receive their own pensions from public sector work.

The elimination of the provisions in many ways simplifies retirement income planning for affected beneficiaries, financial advisors say.

"For the people who are affected by this, you're looking at a pretty significant increase, in many cases, of what their retirement income is going to be," said Michael Daley, director of marketing at HealthView Services. "It's good news for them."

For financial planners and their clients, the challenge now is gauging how much of a benefit increase to expect and when to expect it, said Joe Elsasser, founder and president of Covisum, a Social Security claiming software company.

The extra income may also present some complications when it comes to affected beneficiaries' taxes and Medicare premiums, experts say.

Beneficiaries could see higher taxes on benefits

Social Security beneficiaries may have their benefits taxed if their income falls over certain thresholds, experts say.

The additional money may also push some affected beneficiaries into higher tax brackets, according to HealthView Services.

Notably, President-elect Donald Trump has said he wants to nix taxes on Social Security benefit income, though it remains to be seen whether that change will be put into effect. However, per current rules, up to 85% of Social Security benefit income may be taxed.

The income thresholds upon which those levies are based are not adjusted annually for inflation. Consequently, more beneficiaries are subject to those taxes on benefits over time, including middle-class households, Daley said.

Those levies are determined based on a formula called combined income — the sum of adjusted gross income, nontaxable interest and half of Social Security benefits.

Individuals pay taxes on up to 50% of their benefits if their combined income is between $25,000 and $34,000, or for married couples with between $32,000 and $44,000.

Individuals may pay taxes on up to 85% of their benefits if their combined income is more than $34,000; or for married couples with more than $44,000.

"Because Social Security benefits are taxed differently than everything else, people are going to really want to pay attention to their other sources of income," Elsasser said of the anticipated benefit increases and lump-sum payments.

For example, if a retiree has both a taxable account and traditional individual retirement account, they may want to prioritize withdrawals from the taxable account because only the gains would be taxed rather than the entire withdrawal, Elsasser explained. In the event the lump-sum payment of retroactive Social Security benefits is not distributed, they may take an IRA withdrawal later in the year.

Beneficiaries may see higher Medicare costs

Additional benefit income for individuals affected by the Social Security Fairness Act may also result in higher income-based surcharges for Medicare Parts B and D.

Medicare beneficiaries with higher incomes must pay what's known as income-related monthly adjustment amounts, or IRMAAs, for their Part B and Part D premiums.

"If you get a lump sum but you're not paying attention to your other incomes, you could unwittingly be pushed into higher Medicare premiums two years down the road," Elsasser said.

That will mostly be a concern for people who are on the cusp of the income thresholds, he said.

In 2025, Medicare Part B beneficiaries who file individual tax returns with $106,000 or less in modified adjusted gross income — or married couples who file jointly with $212,000 or less — pay a standard monthly premium of $185 per month.

Beneficiaries above those income thresholds pay higher Part B premium payments, based on an IRMAA. This year's rates are based on income on tax returns filed in 2023.

In 2025, Part D beneficiaries over the $106,000 threshold for individuals and $212,000 for married couples are also subject to income-related monthly adjustment amounts in addition to their plan premiums. Those monthly premiums are also based on yearly income reported on tax filings for 2023. In 2025, the national base Part D premium is $36.78.

Steps to take now

Beneficiaries who are affected by the Social Security Fairness Act should consider consulting with a financial advisor to assess the implications of the change on their personal financial circumstances, said Ron Mastrogiovanni, chairman and CEO of HealthView Services.

Additionally, it would help to sit down with a certified public accountant when filing their taxes to plan for 2025, he said.

The Social Security Administration also plans to provide more guidance on the new law as more details become available.

For now, the agency recommends verifying that direct deposit and the mailing address it has on file are still accurate. To update that information, Social Security recommends changing it online or calling or visiting an agency office in person.

Some individuals may now become eligible for Social Security benefits for the first time, now that the WEP and GPO provisions have been eliminated.

To file for benefits, the Social Security Administration recommends either filing online or scheduling an appointment with the agency.