Social Security retirement benefits are sometimes taxable.
As My San Antonio explains in "Will I Pay Taxes on My Social Security Benefits?" many Americans are surprised to learn that they can be taxed on their Social Security retirement benefits. People believe the money they receive was already taxed when they paid into the system.
As a result, taxing it again amounts to double taxation but the federal government views it differently.
The total amount most people pay into the system equals 15% of the total value of lifetime benefits. As a result, up to 85% of Social Security benefits can be taxed and it will not be double taxation.
But not everyone is required to pay federal income taxes on their benefits. It depends on the other income a person makes.
The basic rules are as follows:
- Single people whose total incomes are between $25,000 and $34,000 may have 50% of their Social Security benefits taxed. A total of 85% of benefits may be taxed for people making more than $34,000.
- Married people filing jointly may have up to 50% of their benefits taxed if their combined income is between $32,000 and $44,000. Up to 85% of benefits could be taxed for couples with higher incomes.
- The government is direct when it comes to married people who file separately. They are almost certain to pay taxes on their Social Security benefits.
Social Security benefits also face state income taxes in 13 states.
Reference: My San Antonio (March 20, 2016) "Will I Pay Taxes on My Social Security Benefits?"
