How Social Security is Taxed | Made Easy!

Data discussed in the video

00:00 Introduction
00:16 Taxes on Social Security
00:46 How Social Security is taxed
01:01 Combined Income explained
01:28 Combined Income formula
02:22 Social Security tax thresholds
03:40 Social Security tax three tests
04:42 Jim and Cathy
06:11 About the thresholds

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Disclaimer: this video is for educational and entertainment purposes only and is not meant to be a substitute for legal, accounting, tax, or professional advice. If you have any specific questions about any legal, accounting, tax or other professional service matter you should consult the appropriate professional services provider.

[dipaknadkarni]

Thank you.
My wife and I were on active duty in the US Navy.
She died on active duty and is buried with full honors in Arlington National Cemetery.
I retired at nearly 30 years on active duty In the Summer of 2021.
I decided that I would take survivor benefit, waiting until age 70 to take mine.
I would have asked her to do the same so she could be financially independent.
I miss her terribly.
I thank you for all of your videos.

[puravida]

Why is social security even taxed! Especially, when the tax table is not even adjusted for inflation.

[voyagerman]

Simple straightforward example, thank you. This is the first time I’ve ever heard of choosing lowest of 3 calculations like in your example. Most content just states the income thresholds.

[guzzi]

Great information. They never say how much money is put into the system when someone passes away or even if it is put back into the system. Unfortunately there are quite a few people that paid into SS all of their working lives but never got to receive any payments from what they paid in because they are no longer with us. It is bad enough that we pay into our own SS throughout our working years, then when we no longer can work or just don't want to because of various reasons, we still have to pay taxes on what we paid in.

[guitjammin]

Geoff, With the the 3 tests, do you get to choose between them and of course select the lowest outcome as in this scenario where only $16200 was subject to tax? I assume that amount is then added to AGI to determine your final tax?

[anniesshenanigans]

I am going to watch this several times until I can figure out that 3 option thing.. this is nuts!! I have prepared and filed my own taxes since I was 16. Even with property, deductions, etc.. nothing seems as convoluted as this!!

[TheDealHunter]

Geoff - Thanks for saying, "may owe" a lot. The most valuable words in the tax code on this subject are, "may owe" and "up to". Most YT videos on this subject wrongly state that if your combined income falls in either the 50% or 85% range that your entire SS benefit is taxed at 50% or 85% which is far from the truth. Your worksheet makes this much less complicated.

[semisid]

Based on the comments, there seems to be some confusion as to the 35, 50, and 85 numbers. This isn't the tax RATE, but rather the amount of income to be taxed. In the example given, if this couple is over 65, they still have their standard deduction to use. The AGI would be 52, 200 and deduction is 27, 700 for a taxable income of 24, 500. Marginal rate is 12%. So, what started out as 40, 000 in SS benefits, is reduced to 16, 200 taxable, for a total tax of 1, 944 on those benefits.

[Keerahmendes]

My financial advisor Mr. Rahul Gupta employs the Hammer candlestick pattern, which is a single candlestick pattern that develops at the end of a decline and indicates a bullish reversal, to multiply earnings for me.

[jamesellery]

Thank you so much. I had never heard of the tests before and have not found a lot of info on the net concerning the tests. I have always done my own taxes and may have missed this. Fortunately for me I have not yet started collecting and will probably wait til FRA. Great channel!

[marcd]

All I can say right now is...wow...

First, thank you for trying to explain this to the average tax payer out here. This is the first time I've looked into taxes on Social Security, and all I can think of is how insane the system seems to be. Why on Earth are there so many scenarios for the average person? We all know if you have enough money, none of this is even applicable, which makes it even more frustrating.

I just retired last year at 59 years old. I was planning on retiring at 62, but there were multiple circumstances that allowed me to retire even earlier, saving my sanity in the process. One of these is the fact I have a pension to draw from which takes care of my expenses every month. I still have a 401k and Social Security to start drawing from, and I'm still making decisions for those withdrawals.

Geoff, even with all of the information you just supplied in this video, my situation was not covered. You stated the single amounts, and the married, filing jointly amounts, to apply the three tests to when figuring your taxes. However, I have re-married in the past couple of years, but my wife and I do not file jointly. How does this information apply in my case?

[davidwild]

Thanks for trying to explain this very confusing taxation. I hope my tax software encompasses it into the tax calculation.

[Buckseven]

You are awesome, Geoff! Thanks so much for your useful information.

[dionysus]

Good video ! If I would have been able to keep all the money I paid in SS tax in my job over the last 40 years I wouldn't need SS. A failed system

[southernbelle]

Thanks so much Geoff!!
Great way to start my day having my first year of claiming taxes on my SSR off of my mind!

[dougniwa]

Exactly what I was looking for. Thanks!

[chanks]

If anyone's interested, I followed Geoff's calculations in Excel for my 2023 amounts as well as my estimated 2024 amounts. The excel results matched the Social Security Worksheet from H&R Block 2023 software. The 2023 values resulted in Test #1 while the 2024 values resulted in Test #3. THANKS GEOFF!!

[tomj]

Nicely explained! About a month ago I used my own spreadsheet version I created a few years ago to calculate our tax free Roth conversions for 2022 before the end of the year. I love that thing as I can dial in our taxes perfectly to maximize the form 8880 retirement savers credit and any surprises can be corrected with our new IRA/Roth contributions made post 2022 but before April 18th and credited as 2022 contributions. IRA contributions to lower our taxable income and increased Roth conversions to increase it. Once done with our Roth conversions it's on to stepping up the cost basis in our taxable investments just in case congress wants to change the 0% LTCG/QD rate of the 12% bracket or if we find ourselves in a higher bracket later in life. I find that in this stage of our lives (and at every stage thus far) our spending or more to the point the lack thereof drives our tax plan/lack of tax liability more than anything. Cheers!

[giemt]

thank you for this video Geoff! love the detailed explanation and example you’ve shared, learned something today 😊

[JBoya]

Good video. It's a shame that any of your SS is taxed, but it is good to see the calculations to minimize the taxable amount.