Is a persons tax bracket determined by their AGI or just gross salary? I just received a pay increase that puts my gross salary just a few hundred dollars below the cut off for the 28% tax bracket and next year (2008) I fully expect that my gross salary will be in the 28% tax bracket but I think taxes are based on AGI so I should still be in the
Can someone please confirm that a persons tax bracket is based on AGI or gross salary?
Thanks
Neither. It's determined by their taxable income (AGI less itemized or standard deduction less personal exemptions).
You do realize that only the amount of taxable income extending into the 28% bracket is taxed at 28%, not all of it?
exactly.
yup, this is a point that many people misunderstand. If you are $1 over the 28% bracket, then only that $1 is taxed at 28%.
Is pension considered income, in determining if SS is taxed? What about withdrawals from an IRA, are they "income"?
Thanks
At retirement, social security can be taxed baed on other income, so phantom rates of
50% may appear.
Yes and yes.
Dave
What I actually meant to ask was, "Is SS reduced based on pension income and/or IRA withdrawals"?
Thanks
And I should have added in my previous post that distributions from Roth IRAs do not affect the taxability of Social Security benefits.
Dave
Unless that pension income is from federal government civil service, as mine is. Not sure if state and local government pensions fall into that category.
2 points. Yes, state employees may not get SS, depending. My 80 yr old client was a teacher in Mass, and did not participate in Social Security (what her deductions were, while employed, I don't know, I just know she only collected the teacher retirement, not SS when she retired). For the original question, no, nothing is reduced. If you earned money Fed, or State as my teacher did, you don't earn the SS credits, it's not like she was expecting anything, and then found out that due to pension, she gets less SS. If you have too much income at retirement, the SS is taxed, so the net effect is the same, but the SS check isn't reduced, just taxed more so. This may very well be nit-picky, but it's an important point.
On a side note, it's possible to work in government, earn the pension, and quit after 20 years, no SS earnings. Then work a civil job, and get
20 years of SS credits and quit with both SS and the Gov pension.JOE
This is the situation where SS gets reduced. If the pension is based on income that wasn't subject to SS taxes, then the amount of the pension will reduce your SS benefit. If your pension is increased (for inflation or something), then your SS benefit is reduced additionally. Also, it is interesting to note that a person who receives such a pension will not be able to collect SS as a widow/widower based on a deceased spouse's income. They call this double-dipping. However, and paradoxically, that spouse who collects SS may be beneficiary on the pension and collect both. Finally, note that this pension is based on non-SS taxed income. If you worked for a state of local government and DID pay SS taxes, then nothing happens to your SS benefit no matter what happens with your pension.
Elizabeth Richardson
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