The chances are growing that a portion of your Social Security benefit will be taxable for federal income tax purposes. Isn’t it ironic that politicians pontificate on the need to expand Social Security benefits but at the same time have done nothing that would help some seniors keep more of their current benefit?
Up to 85 percent of your benefits could be taxed, depending on your income. Because these income limits haven’t changed for decades despite rising wages, the chances you’ll owe taxes on benefits also have increased. Less than 10 percent of beneficiaries paid federal income tax on their benefits in 1984, the first year benefits were taxed. Now about 40 percent do, and, under current law, that’s expected to climb to more than half in three decades. Source AARP
It doesn’t take much to have your benefits taxable.
Under legislation enacted in 1983, the Social Security Trust Funds receive income based on Federal income taxation of benefits. 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.
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.
Your adjusted gross income
+ Nontaxable interest
+ ½ of your Social Security benefits
= Your “combined income”
Categories: Social Security