Are my social security benefits taxable? That’s a frequent question when doing retirement planning. The simple answer is it depends on your income. But it wasn’t always that way.

For almost 50 years, no one was taxed on Social Security benefits. Then, during a study of Social Security, a Senate Finance Committee Report said, “…by taxing social security benefits and appropriating these revenues to the appropriate trust funds, the financial solvency of the social security trust funds will be strengthened…” In 1984 legislation approved taxation of up to 50% of social security benefits. And after more than three decades of collecting that tax money, it did not make the social security trust fund stronger. Today every social security statement contains this warning: …by 2034, the payroll taxes collected will be enough to pay only about 79 percent of scheduled benefits.

With the outstanding track record achieved by the 1984 legislation, the government decided to do it again in 1993 and raised the tax ceiling on benefits to 85%. The government explained it this way: The additional income tax revenues resulting from the increase in the taxable percentage from 50% to 85% are transferred to the HI (Hospital Insurance) Trust Fund. In other words, Medicare.

How did the government come up with 85%? A Social Security historian wrote, If a rigorous effort is made to identify how much of the average beneficiary’s benefit was directly paid for by the beneficiary, the general answer is about 15%. It’s assumed, then, that 85% of the social security benefits you will receive are made up of contributions from your employer and interest earned on all contributions, yours and your employer’s.

Grab a pencil. Here’s the formula to determine whether your social security benefits are taxable: Add ½ of your social security income + all other income + all tax-exempt interest. This is your combined income. If you:

  • File an individual federal tax return and your combined income is
  • between $25,000 and $34,000, you may have to pay income tax on as much as 50% of your benefits.
  • more than $34,000, you may have to pay income tax on as much as 85% of your benefits.
  • File a joint return, and you and your spouse have a combined income
  • between $32,000 and $44,000, you may have to pay income tax on as much as 50% of your benefits.
  • more than $44,000, up to 85% of your benefits may be taxable.
  • Are married and file a separate tax return, you probably will pay taxes on your benefits.

If you do have to pay taxes on your Social Security benefits, the IRS is generous enough to let you make quarterly estimated tax payments or to have federal taxes withheld from your Social Security check. Either way, the amount of income you expected from Social Security may not be as much as you thought.

Bob Williams


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