To many people’s surprise, yes, you may owe taxes on your Social Security benefits. How much tax you’ll owe depends on how much other income you have.
In this week’s video, Casey walks through how to determine the taxation of your Social Security. Up to 85% of your benefits could be taxable!
Social Security plays a major role in most folks’ retirement plan. Understanding the in’s and out’s is crucial for any retiree who is receiving benefits.
Tune in to find out how your benefits might be taxed.
Show Notes
Must I Pay Tax on My Social Security Benefits? – SSA.gov
Still Working and Receiving Social Security Benefits? – Mullooly Asset Show
Do You Have to Pay Tax on Social Security Benefits? – Full Transcript
**Click here for a full downloadable PDF version of this transcript**
Casey Mullooly:
Do you have to pay tax on your social security benefits? Keep watching to find out.
Welcome back to the Mullooly Asset Show. I’m your host for today, Casey Mullooly. Happy to be back with you for episode three 50. We’re going to talk about social security benefits again, and to a lot of people’s surprise, your social security benefits might be included in your taxable income.
You might have to pay tax on it. It all depends on how much other income you have, so let’s get into it, shall we? If you are a single filer and you make less than $25,000, your social security benefits will not be taxable. Single filer, if you make between $25,000 and $34,000, 50% of your social security benefits will be included in taxable income.
And if you make over $34,000 as a single filer, up to 85% of your social security benefit will be included in your taxable income. So that was single filers. What about joint filers?
Well, if you’re married, filing joint and you make less than $32,000, your social security benefits will not be included in your taxable income. If you make between 32,000 and $34,000, 50% of your benefits will be included.
And if you make over $44,000 as married filing joint, up to 85% of your benefit will be included in taxable income. So there’s a lot there. You got to know, first of all, how you’re filing. Second of all, what your AGI is, you actually use what’s called your modified adjusted gross income when you’re figuring out your social security taxation.
So that is a topic for another video, but I want to make something very clear. You’re not paying a 50 or 85% tax on your social security benefit. That is a common misconception and something that trips a lot of folks up. So I’ll just say that again to make myself extremely clear, you’re not paying a 50 or 85% tax on your social security benefit.
The way it works is either 50 or 85% of your benefit is included in your taxable income. So let’s walk through an example. If you are a married couple and you file your taxes as married filing joint and you get $10,000 in social security benefits and your other source of income are $50,000, so you’re over that $44,000 threshold for married filing joint, that means that 85% of your social security benefit is going to be included.
So 8,500 out of your $10,000 benefit is going to be included in your taxable income. The other 1500 is going to be tax free to you. So that leaves you with an adjusted gross income of 58,500, which when you take out everything else, again, I’m just keeping this very simple, when you take out itemized or standard deductions, that will probably put you in the 10 or 12% federal tax bracket.
So again, not paying that 50 or 85% tax in this situation, it’ll be more like 10 or 12%, which is much more palatable. So big thing to remember here and big thing to take away moving forward is that unless your income is pretty low, you’re going to most likely pay tax on your social security benefits.
And if you’re confused, it’s okay because this is complex stuff. We like to peel back the curtain or give folks a look under the hood and make them understand what they’re responsible for from a tax and retirement income standpoint. So that is the message for episode 350. Thank you as always for tuning in. We’ll be back with you next week.