Though in the past Social Security income was tax-exempt, the landscape of Social Security has changed in recent years. Social Security income is now federally taxable, though this does not apply to most beneficiaries. Further, 15% of your Social Security benefits will be paid out tax-free, no matter what.
Curious whether the bulk of your Social Security income will be taxable? Let’s take a look at the requirements.
Taxing Social Security Benefits
As a general matter, most recipients of Social Security benefits do not and will not have to pay taxes on such benefits, as they do not have an income level that reaches a point where federal taxes would then apply to their Social Security benefits. Most people who have to pay taxes on their Social Security benefits have multiple other forms of income above-and-beyond the benefits payments. For example, a person who continues to work while receiving SSI benefits may earn enough to have to pay taxes on their Social Security income.
The Social Security Administration (SSA) and Internal Revenue Service (IRS) have been quite clear on delineating the circumstances under which benefits will be taxed. Pursuant to the tax rules, you will have to pay federal income tax on some portion of your Social Security income (i.e., 50% to 85% of your excess benefits) if it is above the exempt amount.
The IRS has set several different income limits. For those persons filing as individuals with a combined income of over $25,000, federal income taxes must be paid (taxes on up to 50% of the benefits). If the combed income is over $34,000, then taxes must be paid on up to 85% of the benefits.
For married couples who are filing taxes jointly, federal income taxes must be paid on Social Security benefits (up to 50% of the benefits are taxable) if combined income is greater than $32,000. Combined income greater than $44,000 will expose more of the total benefits to tax liability (up to 85% of the benefits are taxable).
How does it work?
Suppose that you and your spouse have a combined income of $32,000. As a married couple who files taxes jointly, your Social Security benefits may be taxed. Still, only 50% of your Social Security benefits may be subject to federal taxes. As such, you will have $16,000 in tax-exempt benefits.
For many retired persons, Social Security income forms a significant portion of their overall annual income. As such, the prospect of having their benefits taxed can be confused, even scary, for those who were not otherwise expecting their benefits to be subject to federal taxation.
Here at the Law Office of Mike Murburg, P.A., we understand that you may have a variety of concerns — legal, financial, and strategic — and will work closely with you to ensure that your issues are handled with proper care and precision. Attorney Mike Murburg treats every client’s Social Security challenges differently, as each client is dealing with a unique situation.
To schedule a free consultation with an experienced Tampa SSI attorney, call Attorney Mike Murburg today at (813) 264-5363.