SS query

Nov 24, 2013 7 Replies
M

OK, I draw SS. I also work and have other income. So I pay taxes on 85% of my SS income.



Now, my wife will be drawing SS. She is 62. She did work, but has had no income for the past few years (retired). She will be drawing SS based on my higher earnings.



The way SS folks explain it, she gets SS based on her past earnings, plus an additional amount due to my higher earnings.



Anyway, we get to my question:



We file jointly. We have a good income based on my earnings. I pay taxes on 85% of my SS. What about my wife's SS. Does she also pay tax based on our joint income (hence being taxed on 85% of her SS income)? Or does she pay tax on her SS income based on her overall income (which would be zero)? Or is there something in between.



Hope this makes sense



Mel


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J

Perfect sense, Mel.

From the SS site -

----------------- [If you] file a joint return, and you and your spouse have a combined income* that is

between $32,000 and $44,000, you may have to pay income tax on up to 50 percent of your benefits

more than $44,000, up to 85 percent of your benefits may be taxable.

-------------------

Based on the taxation, you might want to analyze the numbers, considering delaying 'her' benefit, and just drawing on yours. Her benefit will increase about 8% per year until she starts taking it, and perhaps you've stopped working.

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J

*Note: Your adjusted gross income
  • Nontaxable interest
  • ½ of your Social Security benefits = Your "combined income"

Sorry - I meant to add this note to be clear what numbers are used for calculation.

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R

Does she also pay tax based on our joint income (hence being taxed on

85% of her SS income)?

Quick answer = yes

This quote from

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"If you are married and file a joint return, you and your spouse must combine your incomes and social security benefits when figuring the taxable portion of your benefits. Even if your spouse did not receive any benefits, you must add your spouse's income to yours when figuring if any of your benefits are taxable, if you file a joint return."

You are aware that the first $32,000 (for MFJ filers) of SSA benefits are exempt from the tax ??

Also, there is a n on-line calculator for this tax at

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P

would filing MFS make sense here?

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M

Joe:

Thank you very much. I somehow missed the fact that they are looking at joint income. It is as I guessed!

Mel

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A

The 8% per year increase is what one gets when one delays taking SSA benefits from normal retirement age to a period 4 years later. Today, that is deferring from age 66 to age 70. A person with a normal retirement age of 66 who takes SSA benefits at 62 pays a penalty of 25%. I.e., After the benefit is computed based on earnings and the number of years, one loses 5/9 of one percent for 36 months and 5/12 of one percent for the next 12 months. That comes to 25% reduction for someone taking SSA at age 62. If this person does wait to age 66 and continues to work, the benefit calculation may be higher based on the earnings during those 4 years and you restore the 25% discount.

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A

The code hates people who file MFS. Look at the base income allowed before one pays tax on SSA benefits. A single person gets a $25,000 allowance. Married joint gets $32,000. MFS gets an allowance of ZERO.

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