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Old 12-09-2017, 08:15 AM   #41
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This is interesting you made me look. For my wife and I together (starting to collect at age 62) we recover our contributions after 6 years.
It's kind of a false comparison don't you think? The government had your money all this time.

Since we don't get deductions going in, to me social security should not be taxable. I can see means testing via taxation above a threshold. In essence, that is what we have.
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Old 12-09-2017, 08:29 AM   #42
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.....If I remember correctly, ACA premium subsidies are not considered taxable income. Why is that treated differently form other Fed programs? Is that because it goes directly to the insurance companies and not to the individual? ....
My guess is that ACA premium subsidies are not considered taxable income because they are calculated based on taxable income so it would become a circular formula and the IRS math is hard enough without adding such complexity.

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It's kind of a false comparison don't you think? The government had your money all this time.

Since we don't get deductions going in, to me social security should not be taxable. I can see means testing via taxation above a threshold. In essence, that is what we have.
While it makes sense that your contributions to social security should not be taxable, why would one think that it should be 100% taxable. They have had your money all this time, have earned interest on it and each benefit payment is a combination of return of capital and your share of the interest.... and 15% is a strawman for the return of capital piece.

It is no different from a non-deductible IRA where contributions are after-tax money and the portion of your withdrawals representing your contributions are non-taxable but what you receive in excess of your contributions are taxed because they are growth that you have never been taxed on.... same thing with some contributory pension plans... and with SPIA benefits in a taxable account. TNSTAAFL.

And while I agree that we are limping toward means testing on some ways, that would be the worst thing for social security. You could have Sally Saver and Sue Spender who each earned the exact same money and made the same contributions to SS.... means testing means that the spender is rewarded and the saver is penalized... then it is a slippery slope to SS becoming just another welfare program.
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Old 12-09-2017, 09:27 AM   #43
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My guess is that ACA premium subsidies are not considered taxable income because they are calculated based on taxable income so it would become a circular formula and the IRS math is hard enough without adding such complexity.
Thank you. Exactly my point about taxation of SS benefits.
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Old 12-09-2017, 09:32 AM   #44
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You are mistaken ... SS benefits are not circular because the amount of SS benefits that you receive are not dependent on your income for the year.... they are based on a benefit formula.... OTOH ACA subsidies are based on your income for the year.

At certain levels of income how much of what you receive in SS that is include in income is dependent on other income, but not on SS income, so that isn't circular either.
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Old 12-09-2017, 10:02 AM   #45
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If you look at purely SS, maybe you are right. But when you look at the whole picture in context, 50% of the SS benefits are part of the income used to determine if or how much is taxed. The more you get in SS benefits affects how much more you get taxed so the less you have after tax. The more you get taxed, the more goes back into the SS trust fund. Maybe not a never ending circle but it is circular by my definition.
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Old 12-09-2017, 12:39 PM   #46
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Yeah... I guess we all need to find something to bitch about.
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Old 12-09-2017, 12:59 PM   #47
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If you look at purely SS, maybe you are right. But when you look at the whole picture in context, 50% of the SS benefits are part of the income used to determine if or how much is taxed. The more you get in SS benefits affects how much more you get taxed so the less you have after tax. The more you get taxed, the more goes back into the SS trust fund. Maybe not a never ending circle but it is circular by my definition.
That has nothing to do with a "circular formula". In your example, Ordinary Income + 50% of SS = taxable income. DONE

In pb's example:
Step 1 - determine taxable income
Step 2 - determine subsidy
Step 3 - subtract subsidy from taxable income to determine "revised" taxable income
Step 4 - determine "revised" subsidy for "revised" taxable income...
Step 3 again - Rinse/repeat.

But the real answer is that the ACA subsidies are in the form of tax credits, and tax credits are not taxable income.
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Old 12-09-2017, 02:51 PM   #48
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Good point... as credits they are outside the tax calculation... but someone was suggesting that they be taxed which would make them circular by definition.
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Old 12-13-2017, 03:42 AM   #49
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Ahhh.....Therein lies the primary problem in my eyes. The execution is the complexity and inequity!

Due to all of the other retirement programs in place such as IRA's, Roth's, 401k"s to name a few, one can manipulate those income streams to the point where their SS benefits are not taxed at all. Another person living the same lifestyle with the same retirement income, with the same SS benefit may be paying taxes on 85% of their SS benefit. i.e. The complexity becomes huge when working between all the other retirement plans/programs. To those people not willing, incapable or unable to optimize those variables, taxing some people's SS at multiple levels becomes complicated and an unfair policy.

Taxing SS benefits has unintended consequences. For me personally, those consequences make it complicated. And if it is complicated for me, I assume that there may be others who are also going thru that same "experience", probably more than a couple of people. in my mind, if SS was not taxed there would be no complexity.


This is what I do... micromanage my income so I stay below both the SS tax income and the IRS filing income. I can do this because I am single, totally out of debt [including my house] and can live comfortably on a low income. But when I get to the IRA RMD age, I'll have to tweak my strategy.

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Old 12-13-2017, 07:56 PM   #50
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This is what I do... micromanage my income so I stay below both the SS tax income and the IRS filing income. I can do this because I am single, totally out of debt [including my house] and can live comfortably on a low income. But when I get to the IRA RMD age, I'll have to tweak my strategy.

.
Depending on your IRA balance, you may or may not be wasting ability to pay a lower rate by(using todays brackets) not using the 10% bracket.If you have a lot of IRA assets and your RMD is high enough you "may" be forced to pay in the 15 or 25% brackets when you could have got some out at lower rates. Same with your state tax if you live in a state with state taxes.I have been micromanaging my income up to the top of the 10% bracket for a few years now, and still kick myself that I wasted a couple years by not paying any tax.YMMV
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Old 12-13-2017, 08:00 PM   #51
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I want to be taxed on 100% of my SS benefits.
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Old 12-13-2017, 09:19 PM   #52
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I am over the RMD age, and have no control over the % that I have to take. I cannot do Roth conversions,because of the limits.
In a sense, it is a good feeling, but I hate to have to pay tax on it
For the past 5 years, my IRA balance has increased in spite of the RMD withdrawals.
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Old 12-13-2017, 09:55 PM   #53
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I love to pay taxes, I love to spend, I love to be making lots of dough. Yes, I'm getting richer even as we speak, I can't spend it as fast as I make it.

I want to die broke and it's very hard work.
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Old 12-13-2017, 10:08 PM   #54
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..........I want to die broke and it's very hard work.
I can help.
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Old 12-13-2017, 10:29 PM   #55
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Depending on your IRA balance, you may or may not be wasting ability to pay a lower rate by(using todays brackets) not using the 10% bracket.If you have a lot of IRA assets and your RMD is high enough you "may" be forced to pay in the 15 or 25% brackets when you could have got some out at lower rates. Same with your state tax if you live in a state with state taxes.I have been micromanaging my income up to the top of the 10% bracket for a few years now, and still kick myself that I wasted a couple years by not paying any tax.YMMV

No state income tax here in Texas. For the past several years, I have been taking money out of my taxable IRA tax free [because I stay under the IRS tax exempt amount.] The more I take now... the less I have to deal with under RMD, which should be a few thousand a year higher than what I'm taking now [and hopefully the IRS tax exempt amount will be increasing annually too.]

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Old 12-14-2017, 07:57 AM   #56
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I want to be taxed on 100% of my SS benefits.
They will allow you to write an additional check to the Dept of Revenue for any amount you feel is appropriate over what you owe by law. You know they know how to spend it better.......
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Old 12-14-2017, 08:08 AM   #57
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I am over the RMD age, and have no control over the % that I have to take. I cannot do Roth conversions,because of the limits.
In a sense, it is a good feeling, but I hate to have to pay tax on it
For the past 5 years, my IRA balance has increased in spite of the RMD withdrawals.
+1
It's too late to do anything about it. And my investments keep growing. It's a problem, but I'll manage.
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Old 12-14-2017, 08:38 AM   #58
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+1
It's too late to do anything about it. And my investments keep growing. It's a problem, but I'll manage.
Perhaps also said it is a good problem to have.
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Old 12-14-2017, 08:56 AM   #59
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I want to die broke and it's very hard work.
It's not so hard if you have help.

Let me volunteer my services...
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Old 12-14-2017, 09:04 AM   #60
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I am over the RMD age, and have no control over the % that I have to take. I cannot do Roth conversions,because of the limits.
In a sense, it is a good feeling, but I hate to have to pay tax on it
For the past 5 years, my IRA balance has increased in spite of the RMD withdrawals.
I'm curious. What "limits" prevent you from doing a Roth Conversion? I'm in full evaluation mode on doing the Roth conversion, paying taxes from the 401K/IRA and am unaware of any income limits. Are there others I am unaware of?
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