Taxes on Social Security Income: 3 Things to Know

After paying FICA taxes your entire life, it may shock you to learn you owe taxes on Social Security income. Here are three things to know.

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Patrick King is a fee-only financial advisor in Atlanta and the Founder of Prana Wealth. Over his career, Patrick has helped CEOs, all-star athletes, Grammy-winning artists, and many others build their wealth, retire sooner, and create a legacy. Patrick enjoys yoga, mountain biking, golf, travel photography, and Clemson football.

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[gladegoodrich]

76 years old and still giving the government a lot more than they give me. You would think after working 50+ years a person would get a break?

[ozarked]

In other words, the SSA is the loan shark in this arrangement. The income tax collected on the benefits is their "vig". It's utterly shameful that our government takes 12.4% of our income to put it in an account for our retirement and then does everything it can to reduce our benefit and then tax it as income.

[keithhults]

My father made it his mission to avoid paying taxes. Tax free municipal bonds are tax exempt. 4% bond returns on a $400k investment, is $16k tax free annual income. And you maintain your assets.

[krafty]

After age 65, all taxpayers in good standing, should be exempt from income taxes!
We Senior citizens, finally reaching retirement age, need all of our available benefits to help retire safely and comfortably.

[PranaWealth]

It seems like there are a lot of you who are upset about these taxes on Social Security. I made this video to bring awareness to how the taxes work, but had no idea that it would bring up so much anger and frustration.

[susannabruemmer]

when is the best time to take social security????

[stevevet]

Would love to have seen some examples and what to look out for in the way of errors that will cost you more taxes.

[rtta]

I'm beyond full retirement age and work part-time as self-employed. I pay double social security because of this. Then taxed at 85% of SSI come tax time. Feel like I'm getting screwed big time.

[roccogant]

the politicians would tax your diarrhea if they thought they could get away with it...

[ws]

Only 50% of the social security benefit is included in the combined income amount. This is an important fact. Thanks for mentioning this.

[tshooter]

Nicely done. Short, clear and to the point. Thanks.

[todddunn]

A small correction. In tier one ($32K to $44K combined income for joint filers) 50% of SS that brings combined income above $32K is taxable. Similarly 85% of SS that brings combined income above $44K is taxable. For example consider a couple with $25K non SS income and $20K of SS income. Their combined income is $35K. Since that is more than the $32K threshold 50% of the $3K of SS that pushes combined income above the $32K threshold would be taxable giving a $26.5K taxable income. However, since $26.5K is less than the standard deduction for a couple, there would be no tax due. In other words it is more complex that you make out. This is all very clear if you look at the SS security worksheet in the 1040 instructions.

[catmando]

It’s called “non-taxable income” (Roth 410K’s and Roth IRA’s) but then if it counts as part of one’s combined income in a formula to determine if you pay taxes on your social security or not, then it isn’t actually non-taxable income after all. If that’s what I’m hearing, it sucks!

[zmanphx]

No adjustment for inflation since '93 ? Time for update.

[KatieLibby]

Why is it seldom mentioned in the national discussions that the simplest way to fix SS for the future is to raise the cap on the payment level. Someone who makes less than $140, 000 (roughly) is paying 100% FICA on their income, someone who make $1M is paying a pitance. (Love your videos),

[badweetabix]

Social security was a scam from the very beginning when it came into being in August 14, 1935. At that time, the minimum age for retirement payout was 65 years old. However, the average life expectancy in 1935 for men was 61.7 and 65.1 for women and most women did not work fulltime. The life expectancy dropped 4 years straight from 1935 to 1940 and for men it did not exceed 65 until 1949.

[timothymiller]

I e-mailed my congress representative what she thought about SSI being taxed when it was already taxed and if she would propose an amendment for the currently discussed stimulus bill. She provided a non-response about taxes in this proposed bill but did not even discuss about SSI taxation so do not expect any relief from Congress about this double taxation.

[johnscott]

A little background. Social Security used to be tax free. But other sources of retirement income were not, things like pensions and annuities. So in order to level the playing field so to speak, they introduced taxation of Social Security during Reagan’s term of office. Because your employer paid half of the FICA taxes, they set the limit on taxation at 50%. They set the thresholds for the combined income calculation very high, for the time, so that only a few rich people had to pay. They deliberately did not index the thresholds to inflation so that eventually everyone except the very poor would have to pay tax on their Social Security. In 1993, the chief actuary of the government calculated that the average person only contributes 15% of their eventual lifetime benefits so they could safely raise the taxing threshold and tax up to 85% of benefits without causing double taxation. So whether you agree with what they did or not, know that there was method in their madness. They didn’t just make this stuff up .

[vnnyCao]

This is a good video, I want to use this say something, I will forever be indebted to you Gardner 😇you’ve changed my whole life I’ll continue to preach about your name for the world to hear you’ve saved me from a huge financial debt with just little investment in money market, thanks so much Mrs Rose Gardner

[johnscott]

You need to clarify this. It appears that you are saying that there is a financial cliff that you go over when your combined income reaches certain levels. But what you should have said is that the first $32, 000 of combined income for a married couple is NEVER taxed. The amount between $32, 000 and $44, 000, in other words $12, 000, is counted at 50%, so $6, 000. And only the amount OVER $44, 000 is counted at 85% for taxes. A married couple could have benefits of $3, 000 per month each and pay no taxes if this is the only source of income. They could even have money from a traditional IRA and not have any taxes. Suppose they took out $8, 000 from a traditional IRA. With their Social Security this would give them an income of $80, 000. Half of their Social Security is $36, 000. Add the $8, 000 from the IRA and they are at $44, 000. So, $6, 000 of their Social Security would be taxable along with the $8, 000 from the IRA for a total of $14, 000. That’s less than the standard deduction so they would owe no tax.