Federal Tax on Social Security Benefit Computation

[oldsoldier1976]

Originally Posted by Worren

As a combat related disabled Vet I find that taxing military retirement benefits is a terrible way to treat people. Nobody can get rich on retirement/disability benefits. Those with less than 50% Va benefits and cannot work are not really able to afford very much in the first place. Perhaps if folks started bugging elected officials, especially in election years, states might reconsider taxing military retirement benefits.

It is supposed to be changed but congress is sitting on the bill. HR 303 has been put through the committees and is sitting waiting on the vote. It started back in 2007. 10 years they have been debating that.

https://www.congress.gov/bill/115th-...house-bill/303

Introduced in House (01/05/2017)

Retired Pay Restoration Act

This bill: (1) allows the receipt of both military retired pay and veterans' disability compensation with respect to any service-connected disability (currently, only for a disability rated at 50% or more), and (2) repeals provisions phasing in the full concurrent receipt of such pay through December 31, 2013.
Individuals who were retired or separated from military service due to a service-connected disability shall be eligible for the full concurrent receipt of both veterans' disability compensation and either military retired pay or combat-related special pay.

I have written my congressional representative and urged my friends to write theirs as well. It is kind of near and dear to my heart. I am a disabled veteran who is just about to receive retirement pay as well. Currently I am at 40% and while I might remain at that level I am appealing a decision of non-service connection of one of my injuries. The current system will allow me to keep my VA disability pay and subtract that amount from my retirement pay. The VA pay is not taxed but the retirement pay is.

[loveautumn]

NY state doesn't tax your SS but I'm talking Fed taxes.

[nicet4]

Originally Posted by oldSarge98

I try to maintain a strict budget and am 93.8% successful (one of those SWAG statistics there.) Nonetheless I am trying to employ that ethic as I look at my approaching retiremnet budget. Essentially I can retire from full time employment any time but I am hoping to stick it out until I reach normal retirement age.

I am having difficulty understanding how much of our Social Security benifit will be taxable. I know the 0/50%/85% rule and where they come into play based on our joint benefit. The hard part is determining what portion of our monthly budget is added to the 50% Socical Security benefit amount to figure adjusted gross income.

Here are the components of our retirement income:

• Social Secuirty benefit
• Military retirement
• 401(K) distribution(s)
• Part-time emloyment

Right off I know that any pay for part-time emoloyment will be considered earned income, no question there. My research to date leads me to believe military retirement is not counted as earned income but I haven't found conclusive statements to that fact when it pertains to this computation. And finally, I am completely in the dark as far as distributions from a traditional 401(k). I am leaning to think that money from a traditional 401(K) since it is pre-tax money it will be considerd earned income.

Using my assumptions and false numbers for the following examples can anyone tell me how correct this would be?

Annual amounts counted towared Social Security benefit eligible for taxation:
Example 1

• $9,000 Social Security (half of actual joint benefit of $18,000)
  
• $0,000 Military retirement (not counted as earned income)
  
• $6,000 401(K) distribution(s)
  
• $5,000 Part-time employment income

$20,000 adjusted gross income being less than $32,000 means 0% of the Social Security benefit will be taxable. Example 2

• $11,000 Social Security (half of actual joint benefit of $22,000)
• $00,000 Military retirement (not counted as earned income)
• $10,000 401(K) distribution(s)
• $15,000 Part-time employment income

$37,000 adjusted gross income being more than $32,000 means 50% of the Social Security benefit will be taxable.

Does this look right?

I use this online worksheet and it appears to me to be pretty accurate. If someone finds it has errors can they please let me know?

Social Security Tax Calculator: Are Your Retirement Benefits Taxable?

[reed303]

Originally Posted by nicet4

I use this online worksheet and it appears to me to be pretty accurate. If someone finds it has errors can they please let me know?

Social Security Tax Calculator: Are Your Retirement Benefits Taxable?

I plugged in my actual 2016 Fed income numbers, which were filed on-line, and the calc was good on 2 of 3 of its 3 final numbers.

IE;
Taxable Social Security benefit $10,744 = exactly right
Percent of Social Security benefit subject to taxation 30% = actually 29.6%
Estimated taxes due $1,612 = incorrect because the calc does not ask for your adjustment, credit, exemption or deduction numbers. My actual tax due was $1823, so close but not exact, and they do say "estimated"

The best part of the calc is it shows you how the IRS worksheet works, which is in the IRS 1040 and 1040A Instruction packages. Or Pub 915.

[selhars]

As for how much of Soc. Secur. may be taxable, I've been trying to find this info out for ages. I just did see many places give this kind of clarity.

It means a lot less Soc. Sec. will be taxable than I thought. (If rules stay the same by the time I collect YEARS from now)

I always see info about 50% or 85 % of benefits being taxable. But I'm just now seeing (and I do a lot of research) that the amount to include in taxable income will be the lesser of either a) half of your annual benefits or b) half of the difference between your combined income and the IRS threshold.

That means the taxable part of my Soc. Security, or the tax I end up paying on the taxable part of Secur. won't be much at all. I always here concern (I won't say complaints) from people about Soc. Secur. being taxed. I thought it would be a real hit financially. But seeing this new info -- so far at least -- it doesn't seem like it will be that big a deal.

The threshhold starts at 25K for singles and 32K for couples. If a person's income isn't THAT much over the threshold there may not be that much tax at all. (of course that's relative)

This was posted earlier in the thread but darn it I was leaving a job, selling a house and moving and not really on the boards a lot that time.

Thanks to OldSarge 98 and Clancer13 as well now that I'm finally seeing it.

So in your Example 2 (which totals $36,000 and not $37,000)
It would seem that you would only pay taxes on $36,000 - $32,000 = $4,000.