Should Social Security be taxed?
About a third of Social Security recipients pay federal income tax on a portion of their benefits. Is that fair?
This post comes from Jim Wang at partner blog Bargaineering.
After a post a few weeks ago about reading your Social Security statement, reader "J. Shoe" asked the following question:
Just trying to find out if it is true that any Social Security benefits you start taking are taxed starting at 50% of the money you receive. So that if you take 5K from SS in one year, they put a tax on 2.5K of that money. Can that be real and is there a link to see this horrific scam? It's bad enough they borrow from SS without the intention of paying it back, but this crazy.
I don't see how it's crazy, but I also didn't fully understand how Social Security benefits are taxed. For more information, I turned to Publication 915: Social Security and Equivalent Railroad Retirement Benefits (.pdf file), which is the IRS document that explains everything.
Are your benefits taxable?
Add up all the benefits you received, which is in Box 5 of your Form SSA-1099. Take half of that amount and add it to your taxable pensions, wages, interest, dividends and other taxable income. Then add any tax-exempt interest income, such as from municipal bonds or savings bonds. (Post continues below.)
Now compare that number with the base amount for your filing status (these are 2011 figures):
- Single, head of household, or qualifying widow(er) -- $25,000.
- Married filing jointly -- $32,000.
- Married filing separately (living apart) -- $25,000.
- Married filing separately (living together at any time during the year) -- $0.
If your total is less than the base amount for your filing status, you are not taxed on any portion of your benefits. If your number is more than the base figure, you'll be taxed on up to 50% of your benefits. If your base number is greater by a significant amount -- $9,000 more for single, head of household and qualifying widow(er) or $12,000 more for married filing jointly -- then you'll be taxed on up to 85% of your benefits.
The Social Security Administration says that about a third of recipients pay federal income tax on a portion of their benefits.
Should Social Security benefits be taxed?
I don't think so. When you make (forced) contributions, those amounts are deducted from your income but you still pay income taxes on them. When you get disbursements from the SSA, you can be taxed on up to 85% of your benefits, which means you're getting a 15% discount, but it's on contributions that were already taxed when you made them.
It's a little messy because you get more out of Social Security than you put in, but you were taxed going in, so should you be taxed going out? It's like making a contribution to a Roth IRA and then being taxed on the back end too.
More on Bargaineering and MSN Money:
Taxed for what we've already been taxed on.Hell no.I'd revolt.Can someone please remove Obummer from office.
Tax and spend the liberal way.Always has been and always will.
To be taxed on your SS contribution and then taxed again when you collect is double taxation which is supposed to be against the law or did Obama change that too? Obama wants to raise capital gains taxes from 15% to 30% and dividend taxes from 15% to a top rate of 43.4%.and that's not to mention the other 19 new taxes that are in Obamcare. So good luck being able to retire if this joker stays in office. So to answer the question should SS be taxed I would say a resounding hell no! Now is there any doubt this joker is a Socialist.
To all thumbs down you need to get informed about Obamacare. There are no less then 21 new taxes in the bill. $500,000,000,000 will be taken away from Medicare. Medicare Advantage plans will go bye bye. I thought it was the Republicans who were pushing grandma off the cliff? We now know it's Obama and the Democrats.
You voted for Obama to prove you weren't racist now vote him out to prove you're not stupid.
nuckles and mills. YOU and others on THIS board keep yourselves informed by READING,investigating,exploring, and NOT being damn LAZY sitting before the great one eyed monster being eaten up by the INDOCTRINATING trash spewing forth from the monsters mouth.You are right.The REAL problem is The corrupt politicians,the super rich who bought, and paid for them through the VOTES of mainstream emotional IGNORANCE.And the Big banks that are making a ridiculous FORTUNE of damn unearned, exorbitant FEES daily.Politicians who have NO program just grid lock to offer to the DUMB, STUPID, IGNORANT,NAIVE,Electorate.Super rich who have NOTHING to offer the American people who has BUILT many nations to turn and HATE us.Banks who LEGALLY--ROB the American people through bail outs of the PEOPLES money then HOARD it while TURNING out OWN money AGAINST us.WE must SIGN for GOV loans and WILL catch economic HELL when we MISS a single payment.These SUPER GREEDY THEIVES are GIVEN our money.Cart blanche, no questions asked.No provisions to REPAY.I say once more.'Its absolutely astonishing how Americans who are HURT the MOST by these people.Keep sending those BACK to DC to CONTINUE leaving them BEHIND and HIGH TREASON by strengthening the ENEMY and BETRAYING their OWN people.
giveup mentioned GOD.Well--GOD says---"He who FAILS to provide for home FIRST.Is WORSE than an infidel. "Authorized" King James. First Timothy.Chapter 5---Verse 8 As such---- But if any provide not for his own,and especially for those of his own house,he hath denied the faith, and is worse than an infidel.
While you are at it.Read,and STUDY Romans First and Second chapters .Especially Chapter One. Verses 21 to 28
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