Some people who begin claiming Social Security benefits are surprised to find out they\u2019re taxed by the federal government on the amounts they receive. If you\u2019re wondering whether you\u2019ll be taxed on your Social Security benefits, the answer is: It depends.<\/p>\n
The taxation of Social Security benefits depends on your other income. If your income is high enough, between 50% and 85% of your benefits could be taxed. (This doesn\u2019t mean you pay 85% of your benefits back to the federal government in taxes. It merely means that you\u2019d include 85% of them in your income subject to your regular tax rates.)<\/p>\n
Figuring your income<\/strong><\/p>\n To determine how much of your benefits are taxed, first determine your other income, including certain items otherwise excluded for tax purposes (for example, tax-exempt interest). Add to that the income of your spouse if you file a joint tax return. To this, add half of the Social Security benefits you and your spouse received during the year. The figure you come up with is your total income plus half of your benefits. Now apply the following rules:<\/p>\n An example to illustrate<\/strong><\/p>\n Let\u2019s say you and your spouse have $20,000 in taxable dividends, $2,400 of tax-exempt interest and combined Social Security benefits of $21,000. So, your income plus half your benefits is $32,900 ($20,000 + $2,400 +\u00bd of $21,000). You must include $450 of the benefits in gross income (\u00bd ($32,900 \u2212 $32,000)). (If your combined Social Security benefits were $5,000, and your income plus half your benefits were $40,000, you would include $2,500 of the benefits in income: \u00bd ($40,000 \u2212 $32,000) equals $4,000, but half the $5,000 of benefits ($2,500) is lower, and the lower figure is used.)<\/p>\n Note:<\/strong> If you aren\u2019t paying tax on your Social Security benefits now because your income is below the floor, or you\u2019re paying tax on only 50% of those benefits, an unplanned increase in your income can have a triple tax cost. You\u2019ll have to pay tax on the additional income, you\u2019ll have to pay tax on (or on more of) your Social Security benefits (since the higher your income the more of your Social Security benefits are taxed), and you may get pushed into a higher marginal tax bracket.<\/p>\n For example, this situation might arise if you receive a large distribution from an IRA during the year or you have large capital gains. Careful planning might avoid this negative tax result. You might be able to spread the additional income over more than one year, or liquidate assets other than an IRA account, such as stock showing only a small gain or stock with gain that can be offset by a capital loss on other shares.<\/p>\n If you know your Social Security benefits will be taxed, you can voluntarily arrange to have the tax withheld from the payments by filing a Form W-4V. Otherwise, you may have to make quarterly estimated tax payments. Keep in mind that most states do not tax Social Security benefits, but 12 states do tax them. Contact us for assistance or more information.<\/p>\n \u00a9 2022<\/p>\n","protected":false},"excerpt":{"rendered":" Some people who begin claiming Social Security benefits are surprised to find out they\u2019re taxed by the federal government on the amounts they receive. If you\u2019re wondering whether you\u2019ll be taxed on your Social Security benefits, the answer is: It depends. The taxation of Social Security benefits depends on your other income. If your income […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8,1],"tags":[],"class_list":{"0":"post-338","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-individual-tax","7":"category-uncategorized","8":"entry"},"post_mailing_queue_ids":[],"_links":{"self":[{"href":"https:\/\/www.rikardneal.com\/blog\/index.php\/wp-json\/wp\/v2\/posts\/338","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.rikardneal.com\/blog\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.rikardneal.com\/blog\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.rikardneal.com\/blog\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.rikardneal.com\/blog\/index.php\/wp-json\/wp\/v2\/comments?post=338"}],"version-history":[{"count":2,"href":"https:\/\/www.rikardneal.com\/blog\/index.php\/wp-json\/wp\/v2\/posts\/338\/revisions"}],"predecessor-version":[{"id":341,"href":"https:\/\/www.rikardneal.com\/blog\/index.php\/wp-json\/wp\/v2\/posts\/338\/revisions\/341"}],"wp:attachment":[{"href":"https:\/\/www.rikardneal.com\/blog\/index.php\/wp-json\/wp\/v2\/media?parent=338"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.rikardneal.com\/blog\/index.php\/wp-json\/wp\/v2\/categories?post=338"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.rikardneal.com\/blog\/index.php\/wp-json\/wp\/v2\/tags?post=338"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n