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Social Security Benefits Question?
I plan to start collecting SS benefits at full retirement, which for me is 66 and 4 months, or I may wait a bit longer and continue working if I can.
I have heard that my SS benefits are subject to taxes!! Why would that be when I have been paying into SS my whole adult working life?? That isn't right and doesn't make any kind of sense to me!! Can someone explain it please??
- mercedesLv 71 month ago
Up to 85% of social security benefits are subject to income tax because that percentage has not been taxed before. On average each dollar of benefit is composed of 15 cents, tax paid by the employee (and not taxed again), 15 cents paid by the employer and 70 cents interest on government bonds that Social Security invests in.
- Ron AkiaLv 71 month ago
Social Security benefits should not be taxable as you have already paid tax on your earnings while you were working. Now that these funds are being returned to you via Social Security payments, you're finding they are taxed. Welcome to our government.
- AmyLv 71 month ago
If your other taxable income plus HALF of your social security income is over $25K, then you start to owe tax on PART of your benefit. As your income gets very high, up to 85% of your benefit is taxable.
Note that I didn't say an 85% tax. Normal tax brackets apply to 85% of this income.
Most people in retirement do not have high incomes.
- Christin KLv 71 month ago
They are subject to taxes because they are your income after your wages stop coming in. Simple as that. You can opt to have tax taken out of the benefit amount you will get when you sign up. I suggest you do that. Your benefits will also be subject to paying for Medicare. That will also be taken out of the amount you are going to get. If you want to see what this amount will be, you should visit ssa.gov and fill out one of the worksheets there. It will tell you what you're eligible for, what deductions there will be and the amount you will end up with. It makes good sense to do this ahead of time. You already know that working longer will mean a higher benefit amount, too.
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- StephenWeinsteinLv 71 month ago
Because they are income, and the Constitution says that Congress can tax income, and Congress decided to tax them. If you don't like it, you can vote for someone who you think will repeal the tax. But taxes don't have to be "right" or "make any kind of sense". Things are taxed because we vote for someone who decides to tax them, not because it makes sense or is "right".
- ?Lv 61 month ago
The change was made, in addition to raising money of course, to make social security taxed similarly to private pensions.
Private pensions are either fully taxable, partially taxable, or tax free, depending on whether the employer, the employee, or both paid for the pension. When you paid into social security from your paycheck, that money was indeed taxed.
Your employer, however, had to match your contribution dollar for dollar. You were not taxed on your employer's contribution to your social security. Consequently, only 50% of your social contributions were taxed to you. The other half was tax free.
Note that, unlike private pensions, social security is not taxed at all unless half of the recipient's social security plus their other income exceeds $25K ($32K if MFJ).
Edited to add: When the law was changed to first make social security partially taxable, the President of the United States was Ronald Reagan. The Democrats controlled the House, and the GOP controlled the US Senate.
- SlickterpLv 71 month ago
The amount subject to taxes depends on your other sources of income. Might very well be that none of it is subject. It is because SS is set up to help people who NEED it, if you have continuing income from working, you don't NEED it as much and thus they give incentive to not take it as early. Your SS also increases the more you make.
- Anonymous1 month ago
Well actually, half your social security contributions didn't come from you at all. They came from your employer and businesses don't even get social security benefits.
Just because you turn 66 doesn't mean you don't have to help pay for things like national defense, national parks, etc. EVERYONE in the USA is subject to income tax on their income whether they are sixteen or 66. You still get your standard deduction or itemized deductions and your senior discount at Denny's.
If you were told at age 25 or 30 that you had to pay more taxes so that anyone 66 and older who had 40 years to save for retirement could pay no taxes, would you have been down with that?
- kelby7670Lv 71 month ago
Social Security is insurance. If you are making $100000 a year in your retirement, perhaps you should pay tax on some of SS. You do not need to collect on your insurance. Actually, there is no reason to even get SS. If you are not making much you pay NO taxes on SS.
- cynic47Lv 61 month ago
For low-income taxpayers, Social Security benefits are not taxable. For high-income taxpayers, 85% of Social Security benefits are taxable. There is a complex formula for phasing up to that 85% maximum, based on income.
When this law was passed, it was determined that total Social Security benefits (including those for non-retirees like the disabled, survivors and dependents) are paid by equal employer and employee taxes, as well as 35% more from general tax revenues. If you subtract the employee taxes you pay from that total, 85% of benefits come from employer taxes and general revenues, so you haven't been paying for that 85% all your working lifetime -- your employer and the general public have been paying for them. Whether you like it or not (or even believe it or not), that's the way the law was written, as passed by both Democrats and Republicans in Congress.