Social Security

Did you know this about Social Security? Believe it or not most people don’t. πŸ™„

The majority of people collecting Social Security must pay income taxes on a portion of their benefit. 

The law was effective in 1984 to tax Social Security benefits. However, the threshold for combined income that generates the taxation has never been increased so the percentage of beneficiaries has increased from less than 10 percent of beneficiaries (1984) paying federal income tax on their benefits. A Social Security Administration (SSA) microsimulation model, Modeling Income in the Near Term (MINT), projected that 52 percent of families receiving Social Security benefits will pay income tax on their benefits in 2015. 

Social Security Trust Funds receive income based on Federal income taxation of benefits. In 2015 that was $36.1 billion. The funds receive taxes on up to 50 percent of benefits from single taxpayers with incomes over $25,000 and from taxpayers filing jointly with incomes over $32,000.NOTE πŸ€‘

As you can see, it is not difficult to reach the point as which at least 50% of Social Security is taxable for income tax purposes. Several states also tax Social Security benefits. 

Legislation enacted in 1993 extended taxation of benefits. The legislation increased the limitation on the amount of benefits subject to taxation from 50 percent to 85 percent for single taxpayers with incomes over $34,000 and for taxpayers filing jointly with incomes over $44,000. All additional tax income resulting from the 1993 legislation is deposited in Medicare’s Hospital Insurance Trust Fund.

NOTE πŸ€‘ The taxable threshold (combined income) is determined using your adjusted gross income + Nontaxable interest + Β½ of your Social Security benefits = Your “combined income”

The very fact that most Americans pay income tax on their Social Security benefits should demonstrate for people that they have not paid for the benefits they believe they are entitled to; you, your employer and other taxpayers have all paid for the benefits being collected today. 

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