Understanding What Causes SS to be Taxable

[Cantwaitanylonger]

OK, I am a little confused by what I am reading about this. Can someone help clarify it in plain english?

I am trying to understand the income limits that make SS taxable. This is my current understanding for a married couple:
1) They will take $1 for every $2 earned from employment only income over $19560 until FRA.
2) 50% of SS is taxable if my AGI is over $34K forever
3) 85% of SS is taxable if my AGI is over $44K forever

So, do they take #1 and #2 or #3 above? Am I double taxed?

 

[Gumby]

OK, I am a little confused by what I am reading about this. Can someone help clarify it in plain english?

I am trying to understand the income limits that make SS taxable. This is my current understanding for a married couple:
1) They will take $1 for every $2 earned from employment only income over $19560 until FRA.
2) 50% of SS is taxable if my AGI is over $34K forever
3) 85% of SS is taxable if my AGI is over $44K forever

So, do they take #1 and #2 or #3 above? Am I double taxed?

Item number one on your list is not actually tax. It is a reduction in your social security payment. You will get it back later, because your continued work will continue to add to your social security benefit. And, as you note, once you reach FRA, that reduction ends.

This post should help you figure out your social security taxation with respect to items 2 and 3.

https://www.early-retirement.org/fo...-income-levels-2021-a-106300.html#post2506932

 

[Cantwaitanylonger]

Thanks for your response and the link to an excellent answer!

 

[Sue J]

I use this - https://www.calcxml.com/calculators/how-much-of-my-social-security-benefit-may-be-taxed?skn=#results


I never had to deal with your #1 situation of earning over the limit before FRA, but I did have years where less than 85% of my SS was taxed.

 

[jkern]

The tax on SS income is based on a sliding scale after a certain income is earned and then reaches a cap of 85%. It's not a flat 50% or 85%.

 

[scrabbler1]

When I began doing the taxes for my 91-year-old dad last year, I created a skeleton spreadsheet which mimics the necessary calculations, including the ones found in the SS worksheet found in the instruction booklet. Because the income in the worksheet is right on the cusp between all of it not being subject to taxes and some of it being subject to being 50% taxable, I saw up close how sensitive the sliding scale is, and how additional non-SS income was effectively taxed at 15% even though his tax bracket was 10% because the added income pushed 1/2 more of it into the taxable-SS amount. Interesting.....

 

[Masquernom]

1/2 of my social security plus my pension is more than $44,000 a year. I just assume 85% of my SS will always be taxed.

 

[GenXguy]

For a single person, if your income combined with half your SS benefits exceeds $25,000, you have to pay income tax on up to 50% of your SS benefits. If it exceeds $34,000, you have to pay income tax on up to 85% of your SS benefits.

These are not indexed to inflation, so it's like an automatic tax increase every year, which hits extra hard with inflation running so high now.

 

[Gumby]

1/2 of my social security plus my pension is more than $44,000 a year. I just assume 85% of my SS will always be taxed.

Here is how to figure it out precisely


https://www.early-retirement.org/fo...-income-levels-2021-a-106300.html#post2506932

 

[Masquernom]

Here is how to figure it out precisely


https://www.early-retirement.org/fo...-income-levels-2021-a-106300.html#post2506932

Thanks for the link. I just assumed 85% of SS is taxed in my retirement planning. If it turns out to be less, it'll just be a bonus.....

 

[GenXguy]

Thanks for the link. I just assumed 85% of SS is taxed in my retirement planning. If it turns out to be less, it'll just be a bonus.....

Yes, that's what I do, which is more likely as each year passes since the thresholds aren't indexed to inflation, which is running high now.