If your only source of income is Social Security and you are single, you may not have to pay federal taxes on your Social Security. But most people will find their Social Security benefits (yes, even disability payments) will be subject to federal taxes. Twelve states also tax benefits, but Indiana does not.
Most of Social Security is indexed for inflation, but how much you can earn before some or most of your Social Security is taxed doesn’t go up with inflation. That means that more and more people fall into the tax each year. Since 1981, if you earn more than $25,000 as a single person, 50 percent of your Social Security benefit will be subject to federal taxes at your tax rate. If you make more than $34,000, 85 percent of your benefit is subject to taxes.
My clients are so alarmed at this information that they routinely mishear me. I didn’t say that your benefits are taxed at a tax rate of 50 percent. Rather, half your benefits will be included in with your other income when you file taxes. The amount of taxes you pay is dependent upon your tax bracket.
There is a common misconception that at a certain age you won’t have to pay taxes. Untrue. You will pay taxes as long as you breathe (OK, a slight exaggeration). If you have little to no income, you won’t pay taxes. Since the amounts are not indexed for inflation, more people end up paying taxes on their retirement benefits each year.
If you are a married couple, each of you draw Social Security, and your joint income exceeds $34,000, some or most of each of your Social Security benefits will be taxed federally.
If you want to avoid a surprise at tax time, you must file form W-4V to have your taxes withheld. This form is easily found on Google. You can choose to have 7 percent, 10 percent, 12 percent, or 22 percent of your monthly Social Security benefits withheld.
To file your taxes, you’ll need your SSA-1099, known as your Social Security Benefits Statement. This form details how much you were paid by Social Security. Hopefully you’ve heeded my previous advice to go to SSA.gov and set up a free account. If so, you can print off a copy of your SSA-1099 there by signing into your account and clicking on the tab for Replacement Documents. You can access this by Feb. 1 each year.
If you keep working after retirement, you will continue to pay FICA out of each paycheck, too.
Sylvia Gordon is co-founder of The Medicare Family, headquartered in Noblesville, where she educates thousands on Medicare and Social Security in all 50 states. You can learn more at TheMedicareFamily.com.
So they want to tax the money we already paid taxes on. Wow. If they stopped sending money to every country and take care of American people they wouldn’t need to take money who worked they whole life and ALREADY paid the taxes on OUR money. That’s just bull crap. At 67 I’m living in HUD housing. It’s a shame it’s all I can afford. Wow!!!
I agree with Carol it’s double taxation. I think someone should introduce a bill to make double taxation illegal.
We need to stop paying for government free loaders let Congress get a 401 and pay their own health care plan and quit taking ss money to fund immigration..they want immigrants let each Congress person support them see how fast they change their minds… there’s plenty of money to fund ss when we the people cut their income to more than half..they don’t work that hard for their outrageous pay checks.