The Tax SECRET to Social Security Benefits
Up to 85% of your Social Security benefits can be taxable. And it depends on how much money you make in your retirement. In fact, the earnings limits are quite low. Every year, more people join the ranks of those who pay taxes on their Social Security benefits.
If you are a Single person and have Combined Income in your retirement between $25,000 and $34,000, then you will have to report and pay taxes on up to 50% of your Social Security benefits. If you have Combined Income in excess of $34,000, then 85% of your Social Security benefits are taxable.
For married couples filing a joint return with a Combined Income between $32,000 – $44,000, 50% of their social security is taxable. If their Combined Income exceeds $44,000, then they will have to pay income taxes on up to 85% of their benefits.
In 1983, a bill passed that required people to pay taxes on up to 50% of their Social Security benefits. The earnings limit for Single people ($25,000 – $34,000) and Married people ($32,000 – $44,000), have been the same ever since.
In 1994, another bill passed that required people to pay taxes on up to 85% of their Social Security benefits. The earnings limit for Single people (earnings greater than $34,000), and Married people (earnings greater than $44,000), have been the same ever since.
They never indexed those earnings limits for inflation. And as people’s earnings increase in their retirement, more of their Social Security benefits are taxable.
The amount of taxes you may have to pay on your Social Security benefits depends on your Combined Income.
The definition of Combined Income is:
Your Adjusted Gross Income
+ Nontaxable Income
+1/2 of your Social Security benefits
_______________________________
= Your “Combined Income”
So, your Combined Income includes your Adjusted Gross Income and 50% of your annual Social Security benefits. With that definition for Combined Income, it would be difficult to keep your income below the 50% earnings limit, or the 85% earnings limit.
Now you know why every year more and more people are paying taxes on their Social Security benefits. Social Security is taxable!
