Weekend Reading: When Do Social Security Benefits Become Taxable?
This article appears as part of Casey Weade's Weekend Reading for Retirees series. Every Friday, Casey highlights four hand-picked articles on trending retirement topics and delivers them straight to your email inbox. Get on the list here.
Weekend Reading
According to the Social Security administration, about 56 percent of individuals will owe federal taxes on their benefits, and determining if that includes you, as well as how much you could owe, draws down to pinpointing your provisional income.
READ THE ARTICLEUnderstanding your income threshold: In total, your provisional income includes half of your Social Security benefits plus all additional taxable income. Based on this amount, here is how your benefits are taxed:
📌 If provisional income is between $25,000 and $34,000 and you are a single filer: Up to 50 percent of benefits are taxable
📌 If provisional income is $34,000 or above, and you are a single filer: Up to 85 percent of benefits are taxable
📌 If provisional income is between $32,000 and $44,000 and you are filing jointly: Up to 50 percent of benefits are taxable
📌 If provisional income is $44,000 or above and you are filing jointly: Up to 85 percent of benefits are taxable
Crunch the numbers: Upon calculating your provisional income, you can then get a better idea of total taxable Social Security benefits by subtracting the first threshold you fall under and multiplying by 0.5. After that, you subtract the second threshold you fall under and multiply by 0.35. According to the article here, “If your total is less than the maximum, that is the taxable amount. If the total amount is greater than the maximum, the taxable amount is the max”.
My thoughts: As an affluent retiree, it’s highly unlikely you are going to enjoy tax-free Social Security income without some serious tax planning; but even minimizing it just a little bit could have a huge impact over the long haul.