By Mark Sipos, LFG Tax Director

If you’ve worked in a public service job, chances are you’ve heard of the Windfall Elimination Provision (WEP) or Government Pension Offset (GPO). WEP reduced Social Security benefits for individuals with pensions from jobs that didn’t pay into Social Security, and GPO reduced Social Security spousal and survivor benefits for individuals who also received a pension from a job that wasn’t covered by Social Security. But at the beginning of the year, as one of their last acts in office, the Biden Administration passed the Social Security Fairness Act (SSFA), meaning many retirees may see higher monthly payments and possibly retroactive benefits.

Let’s break down what SSFA entails, how the repeals affect you, and what you need to know about the taxation of your Social Security benefits moving forward.

What Changed in 2025?

On January 5, 2025, the Social Security Fairness Act officially repealed WEP and GPO. This change applies to Social Security benefits payable for any months after December 2023. That means if you were previously impacted by WEP, your benefit could increase, possibly significantly.

The repeal also opens the door for retroactive payments dating back to January 1, 2024. In total, more than 3.2 million Americans are expected to benefit from the elimination of WEP and GPO, according to the Social Security Administration.

How WEP, GPO Repeal Impacts Public Employees and Retirees

The repeal has the greatest impact on individuals with non-covered pensions, including many public sector retirees. Teachers, law enforcement officers, firefighters, and other government employees who were once penalized can now collect full Social Security benefits based on their contributions during covered employment.

The repeal of the GPO adds another layer of relief. Previously, the GPO reduced or eliminated spousal and survivor benefits for people who had pensions from government jobs. Now, affected retirees – especially widows and widowers – can apply for full benefits, even if their spouse is deceased.

How Increased Social Security Benefits May Affect Your Taxes

While SSFA could provide new benefits, it’s important to consider the tax implications of receiving a higher Social Security benefit.

The IRS determines whether your Social Security is taxable based on your combined income, which includes your adjusted gross income, any nontaxable interest, and half of
your annual Social Security benefits. Depending on your income level, up to 85% of your benefits may be subject to federal income tax.

If your combined income is below $25,000 (single filers) or $32,000 (joint filers), your Social Security benefits are not taxed. If your combined income is between $25,000 and $34,000 (single filers) or $32,000 and $44,000 (joint filers), up to 50% of your Social Security benefits may be taxed. If your combined income is above $34,000 (single filers) or above $44,000 (joint filers), up to 85% of your Social Security benefits may be taxed.

These income limits haven't changed since 1984, which means more retirees may fall into the taxable range each year, even with modest incomes. With the Social Security Cost-of-Living Adjustment (COLA) for 2025 set at 2.5%, many retirees will see slightly higher monthly checks. But this increase could push your total income into a higher tax bracket, especially when combined with retroactive WEP-related payments.

Planning Ahead for 2025 and Beyond

If you’re receiving a lump-sum payment in 2025 for increased benefits dating back to 2024, it’s wise to review your current tax situation. You may want to update your withholding preferences using IRS Form W-4V to avoid an unexpected tax bill next April. Additionally, take a fresh look at your cash flow. With more money coming in from Social Security, you might consider reducing monthly withdrawals from retirement accounts like IRAs or pensions to stay in a lower tax bracket.

It’s also worth noting that most states, including Ohio, do not tax Social Security benefits. However, eight states currently do, so be sure to understand how your state treats retirement income.

What to Do Next

If you were previously affected by these laws, now is the time to reassess your retirement income strategy. Talk with a Lineweaver financial advisor or tax professional today to ensure you're maximizing your Social Security benefits and minimizing your tax liability.