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I would be surprised if the US Congress elimilnates taxes on Social Security at a time when it is going insolvent, a flood of Baby Boomers are signing up each year, and the national debt is soaring.
Eliminating federal Social Security taxes makes no sense at all from a national financial viewpoint.
Other than that, it would be the first time in life that I got a financial break and that just never happens for me. So I can't see it.
All retirees wish it happens but it won't. There is just no way. Only for the poor and it is unlikely they pay federal taxes anyway.
You may have to dig to find a form for Line 6 of your 1040 form. There is a complicated formula to see if 50% or 85% of your Social Security benefit is subject to tax. It has nothing to do with the standard deduction. Mostly it has to do with how much income you have outside of Social Security.
IIRC for a single you start to pay tax at 25k.
In the tax form you enter the gross of Social Security then in another line the Medicare premiums.
Stupid question that I can't seem to find the answer to: Does the income limit before federal tax kicks in for part of your SS benefit include the SS benefit? In other words is the $25 K all other income including IRA (non-Roth) withdraws but not SS benefits?
Stupid question that I can't seem to find the answer to: Does the income limit before federal tax kicks in for part of your SS benefit include the SS benefit? In other words is the $25 K all other income including IRA (non-Roth) withdraws but not SS benefits?
It's not straightforward. There are only a couple of useful things that can be stated easily with certainty.
(1) If your "combined income" is less than the established limits ($25,000 for an individual return, $32,000 for a joint return), none of your SS benefit is considered taxable income. The IRS defines "combined income" as one half of your SS benefit plus all other taxable income.
and
(2) At most 85% of your SS benefit will be considered taxable income.
In between those extremes there's no simple explanation. I've found it best to experiment with different scenarios using TaxCaster (or similar software).
It's not straightforward. There are only a couple of useful things that can be stated easily with certainty.
(1) If your "combined income" is less than the established limits ($25,000 for an individual return, $32,000 for a joint return), none of your SS benefit is considered taxable income. The IRS defines "combined income" as one half of your SS benefit plus all other taxable income.
and
(2) At most 85% of your SS benefit will be considered taxable income.
In between those extremes there's no simple explanation. I've found it best to experiment with different scenarios using TaxCaster (or similar software).
Ah thanks, so half of the SS benefit counts toward the $32,000. Wow that's not a lot of income before Fed taxes on SS kicks in. In fact it's a given seeing as half of our SS benefits is already $25,000 before IRA withdraws.
I've used the calculators, I won't withhold from my SS check but a healthy withholding on the IRAs should cover our taxes.
I agree it will never happen, it is just political posturing. The day the government decides to not tax me the roughly $4500 a year I have to pay for the privilege of getting my SS is WAY too much to hope for. The income based taxation rule really does need to be revamped, since it went in to effect long before Roths and other legal tax avoidance strategies went in to effect. One could have made a killing in the stock market in a Roth account and have, say $5m and the capital gains are completely untaxed. That person could draw $200k a year from that (4% rule) and still pay no FIC on their SS. Yet someone with a $35k/yr pension will pay tax on 85% of theirs.
I pay my estimated taxes for SS quarterly so at LEAST I earn a little interest vs withholding from my SS check.
And you are correct, it doesn’t take much to go from no taxes to full taxes on 85% of it, which is where the whole Tax Torpedo discussion emanates from. The difference of a $100 in taxable income can suddenly cost some $1000s. It makes no sense.
It is harder than that to decipher, as IIRC, if a couple were to both file at 70 for maximum benefits of say $110k, they would pay no FIC, if that was their only income, and that is clearly above the $32k level.
Last edited by Perryinva; 04-09-2024 at 07:01 AM..
Social Security benefits used to be non-taxable. There is some logic behind this, since FICA taxes are paid with after-income-tax money just as in the case of a Roth IRA. I will be surprised it this makes it through Congress, but it would certainly be a pleasant surprise.
The portion of Social Security that's taxable is the 50% that was contributed by your employer up to a point where the marginal rate goes to 85%.
I would be surprised if the US Congress elimilnates taxes on Social Security at a time when it is going insolvent, a flood of Baby Boomers are signing up each year, and the national debt is soaring.
Eliminating federal Social Security taxes makes no sense at all from a national financial viewpoint.
Other than that, it would be the first time in life that I got a financial break and that just never happens for me. So I can't see it.
All retirees wish it happens but it won't. There is just no way. Only for the poor and it is unlikely they pay federal taxes anyway.
The US Gubmint went bankrupt back in 1933. It's been running under "emergency rules" these past 91 years.
Sure, you can believe everything is fine, but read the law for yourself.
After "Saint" Roosevelt "liberated" all the people's gold money, it was over, and the Fat Lady was singing.
Dollar bills (federal reserve notes) are not dollars. No law or court ruling supports that.
No dollars have circulated since 1933.
To make matters worse, HJR 192, June 1933, and the Gold Reserve Act of 1934, basically voided the USCON, and repudiated Title 12 USC Sec 411.
Yeah, it's a giant con. But it's one "we consented to," saith the law.
What? You don't know how and when you consented? Ask your public servants - politely - to explain what happened to Art 1, Sec 8 and Sec 10, USCON.
Remember, CONgress has no power to "create money." It can "coin money" (stamp bullion) or "borrow money." If CONgress could create money (bullion), why would it need to borrow it? Or tax it back from us, in order to spend it?
Hmmmmm.
And CONgress can't give banks any power to create money, either.
SO what exactly was LENT to CONgress to rack up owing 34+ trillion dollars (not dollar bills).
Oops, sorry, no can ask dat. See clause 4, 14th amendment, USCON.
In short, government can tax back any public charity (entitlements) that it disburses. There's no real money to dredge up "constitutional issues."
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