Social Security
- Thread starter layinwood
- Start date
I would guess that it is taxed as income. Question I have is once you are getting medicare and social security, do you continue to pay those also?
- Mar 19, 2006
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Social Security was tax free for over 40 years. But in 1983 Reagan signed into law, one of many on-going band-aids to shore up SS (and increase equity), a bill congress passed which taxes up to 50% of SS benefits if your adjusted gross income, plus 50% of SS benefits, exceeds $25K.
Of course they didn't index this threshold to inflation - otherwise, it would be about $60K today instead of $25K.
Then a second band-aid was passed in 1993 raising the maximum taxable amount of your SS income from 50% to 85% of it.
Not that many meet the taxable income threshold - 70% of folks today receiving SS income still pay no federal tax on it.
This taxing of SS benefits is aimed at higher income beneficiaries, to make the tax treatment of SS similar to private pension benefits. Thus it was done to also improve the equity of the tax system.
So this is not really taxing your SS benefit, it is using taxes to reduce the SS benefit to higher income folks....
13 states tax Social Security, including some ok low-tax states for retirees, such as Colorado and West Virginia - ya need to check all the taxes you might get hit with before deciding which state to retire in.
Of course they didn't index this threshold to inflation - otherwise, it would be about $60K today instead of $25K.
Then a second band-aid was passed in 1993 raising the maximum taxable amount of your SS income from 50% to 85% of it.
Not that many meet the taxable income threshold - 70% of folks today receiving SS income still pay no federal tax on it.
This taxing of SS benefits is aimed at higher income beneficiaries, to make the tax treatment of SS similar to private pension benefits. Thus it was done to also improve the equity of the tax system.
So this is not really taxing your SS benefit, it is using taxes to reduce the SS benefit to higher income folks....
13 states tax Social Security, including some ok low-tax states for retirees, such as Colorado and West Virginia - ya need to check all the taxes you might get hit with before deciding which state to retire in.
