Is income from Social Security "taxed" differently from
other income. For example, if your income from other sources
is high, do you pay a higher effective rate on Social
Security pension income.
Has this ever been the case in the past?
Terry, I wrote about this a couple months back, along with
two very nice graphs, showing how a single woman, 65, with
$33K in planned IRA distributions, can briefly visit the
46.25% bracket due to social security tax rules. When half
of your Social Security benefits and other income exceed
$32,000, your benefits become taxable. I rarely refer to my
website when answering a question here, but this answers
your question, and has a link to 'history of taxation of
social security benefits.'
If half your gross social security benefit plus all other
income is more than the amount shown below, then some of
your benefit will be included as part of your taxable
income. Up to 85% of the benefit could be included in your
Filing Status threshold amount
MFJ $ 32,000
Single, HoH 25,000
MFS (but never
lived together that year) 25,000
MFS but did live together
even one day during the year $0
For quite a few years, and those figures have not been
indexed to inflation.
Before that the maximum rate was 50%.
And long before that social security was never taxed.
ArtKamlet at a o l dot c o m Columbus OH K2PZH
email@example.com (Terry Faust) posted:
No, Social Security Income is not segregated from your other
income, so if your total income is enough that Social
Security (SS) becomes taxable, the taxable amount would be
added in to your total income and the tax calculated on that
However, there is no doubt that once your Total income --
including 1/2 of your SS -- reaches $25,000 ($32,000 if
MFJ), then _part of your
social security gets added to your tax. There's a complex
worksheet that computes exactly how much, which is included
in the instructions for whichever form you're using -- and
all software would automatically compute the amount and
produce a copy of the worksheet.
Now, technicallly, if your total income -- including the
taxable amount of SS -- reaches a level that exposes you to
a higher rate bracket, then the SS share would play a role
in your higher tax rate ... but it's an indirect role. In
other words, your SS isn't selectively taxed at a higher
Terry Faust writes:
Yes and no. :-)
To the extent that your benefits are taxable, they are taxed
like any other ordinary income.
However, because of the way the calculation of how much of
your benefits are taxable in the first place works, if you
are in the zone between where your benefits start to become
taxable and the taxability cap (no more than 85% of your
benefits can be taxable), your other income actually ends up
being taxed significantly higher than the tax bracket rates
would lead you to believe.
For example, if you are single and half your SS plus all
your other income is more than $34,000, each additional $100
of income causes an additional $85 of SS to become taxable
(until you hit the 85% of benefits cap).
In other words, if you're in this phase-in zone, an
additional $100 of gross income increases your taxable
income by $185.
What this means is that if, for example, you are in the 15%
bracket, the additional $100 of income increases your tax by
$185 * 0.15 = $27.75. Which means that even though you
think you're in the 15% bracket, you're really in a 27.75%
Rich Carreiro firstname.lastname@example.org
"Terry Faust" wrote
The taxable portion of Social Security benefits are taxed
the same as all other ordinary income. In that it adds to
your total taxable income, if that is what you want to point
to for causing you to bump into a higher tax bracket
(instead of wages, rents, etc), feel free.
Paul A. Thomas, CPA
From 1984 through 1993 the portion of Social Security
benefits included in gross income ranged from 0 to 50
percent of the benefit.
From 1994 to present the portion included gross income has
ranged from 0 to 85 percent. The higher the modified AGI
used in the calculation of taxable Social Security benefits,
the higher the inclusion of Social Security benefits
included in gross income.
Take special note that the state income tax refunds and
other itemized deduction recoveries are included in the
calculation of taxable Social Security benefits. The
refunds/recoveries can then be used to reduce allowable
deductions, credits, exemptions, exclusions that are are
subject to AGI or modified AGI phase-out. This means that
the income used a state income tax overpayment AND the
refund of the overpayment are used to increase the taxable
portion of Social Security benefits and reduce deductions,
credits, exemptions, and exclusion in the respective years.
You might find the information at the following link helpful.
`06Check out the references listed at the end of those comments.