The average Social Security recipient paid $15,000 in taxes in 2018 and has a $926 monthly benefit. But suppose you are a non-taxpayer and get a monthly SSI check. In that case, your monthly use is only $527, while your monthly tax bill is $13,744, according to the latest annual report from the Social Security Administration.
If you’re currently getting social security income, you might wonder what your taxes look like. But did you know there are some taxes on social security income you don’t have to pay?
Social Security has existed since 1935, and millions of Americans depend on it to survive. But what if you didn’t need to worry about paying taxes on social security income?
If you are already receiving social security benefits, then read on. Otherwise, it may be time to learn more about the tax rules governing your benefits.
The U.S. tax system is a complex beast, and not everyone understands the ins and outs of it. If you have earned income from Social Security or pensions that are taxed, the system is designed to help pay for Medicare and Medicaid, as well as many other government programs. But many people don’t realize that some of their Social Security benefits are taxed at a higher rate than expected. The rules and loopholes that affect how taxes are calculated can be complicated and confusing, so we’ll try to sort through it all.
According to the Social Security Administration, social security income is defined as money received from the following sources:
* Social Security benefits.
* Retirement benefits.
* Survivor benefits.
* Military retirement pay.
Social security income can be received by individuals who are:
* Eligible workers.
* Eligible spouses and children.
* Eligible widows and widowers.
* Surviving spouses and dependents.
Social security income can be received by individuals who are:
* Retired.
* Disabled.
* Members of certain groups.
Social security income cannot be received by individuals who are:
* Self-employed.
* Government employees.
* Nonresidents.
* Aliens.
* Certain members of households.
* Certain individuals.
* Individuals who do not meet all the requirements for Social Security.
* Certain members of certain groups.
Social security income can be received by individuals who are:
* Retired.
* Disabled.
* Members of certain groups.
Social security income cannot be received by individuals who are:
* Self-employed.
* Government employees.
* Nonresidents.
* Aliens.
* Certain members of households.
* Certain individuals.
* Individuals who do not meet all the requirements for Social Security.
* Certain members of certain groups.
Social security income can be received by individuals who are:
* Eligible workers.
* Eligible spouses and children.
* Eligible widows and widowers.
* Surviving spouses and dependents.
Social Security benefits are taxable.
Social Security benefits are subject to federal income tax. Your social security benefit is taxable when you file your tax return.
Your social security benefit is taxable when you file your tax return. For most people, this is done on April 15.
If you received a $1,000 monthly benefit in 2017, it would be taxable at a rate of 15% (15% x $1000 = $150).
If you received a $5,000 monthly benefit in 2017, it would be taxable at a rate of 30% (30% x $5000 = $1500).
Social Security is a retirement system for the U.S. population that the Social Security Administration administers. Every year, the SSA lists everyone who gets social security checks.
The most important part of the list is the amount of money each person receives and how much they receive each month.
A quick way to look at it is to consider everyone on the list as one large family. The biggest family member is the person who is paid the most per month.
Then, every member of that family gets a monthly check. The younger family members, the children, get a smaller bill than the older members.
The younger family members have a higher tax rate than the older members. This is because the more youthful members have a shorter time to retire. They also have less money saved up for retirement.
For example, a person in their 50s receives $1,500 monthly. They will have to pay a 6.2% federal income tax.
Their spouse receives $1,800 per month. They will have to pay a 10.4% federal income tax.
If both couple members are in their 50s, they must pay a 14.2% federal income tax.
This is why some people choose to live off of social security income. If you are one of those people, here’s a list of what you can do to reduce your taxes on social security income.
Social security has become a major source of income for many Americans. And, as long as you were born before January 1, 1954, you can collect social security benefits at any age.
Most Americans will start collecting benefits at age 62. So, to begin collecting social security benefits, you must be 62 years old by April 30, 2034.
Frequently asked questions about Taxes on Social Security
Q: Can I count my Social Security income toward my taxable income?
A: Yes, as long as the income is considered earned income.
Q: Can I claim my Social Security payments as an itemized deduction on my tax return?
A: If you’re claiming Social Security benefits, you can claim any amount you want as a deduction on your tax return.
Q: Can I use my Social Security payments to offset other income I make?
A: You can if your benefit is subject to a phase-out or limit. For example, if you take $1,000 in Social Security benefits and earn $6,000 in other income, you can only deduct the first $2,000 of Social Security benefits.
Top myths about Taxes on Social Security
- The tax only applies to benefits after the age of 70.
- You do not have to pay taxes on your Social Security benefits.
- You are allowed to count your Social Security benefits as income.
Conclusion
The IRS and Social Security Administration have developed new rules for calculating Social Security benefits. These new rules include changes to how taxes are calculated and how to determine taxable income.
This is just the beginning. We expect that there will be many additional changes in the future. Therefore, it’s important to understand the basics of the new rules to avoid surprises.
The new rules can confuse most people, and many ways to calculate benefits exist exist. For example, the new rules do not affect the amount of Social Security benefits paid. Still, how taxes are calculated and how to determine taxable income.
However, the income threshold for filing Social Security taxes has changed. Under the old rules, the taxable income threshold was $43,750 in 2016. This will increase to $44,000 for 2017 and $45,000 for 2018.
