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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?

By MSN Money Partner Jul 10, 2012 12:49PM

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.

Image: Taxes (© Thinkstock/SuperStock)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:

Jul 11, 2012 12:55AM
Repubs/banksters/wallstreeters have been trying to crash Soc sec for years to get their hands on that money. Bush junior tried and tried and was defeated. Now repubs are enacting voter suppression laws against the elderly so they won't be able to fight off the rich getting hands on Soc Sec money! Republican Ryan plan specifically gets rid of Soc Sec and gets money into wallstreet. Seniors beware.
Jul 11, 2012 12:54AM
social security is a lot like Obamacare. it is a tax that buys insurance not benefits. collected benefits from that insurance is income in the eyes of the government.
Jul 11, 2012 12:53AM
SS should pay interest on the money.  Hell im 57 and got no job now thank to the Goverment and Ford Motor Co. Use to make around $80.000 a year Im Skilled Labor (Millwright)    Instead of building all the Goverment is doing is sending our jobs some where else SO what money I have made thats been held back from me should be collecting interest not being TAXED!   
Jul 11, 2012 12:51AM
No, Social Security should not be taxed because you already paid a tax on that money.  The government is double dipping with our hard earned money and that should not be allowed to happen.  If anything Social Security benefits should be increased so people aren't living in poverty if all they have is Social Security.
The government takes and takes from the American people but we do not get the benefits like the illegal immigrants do. This is wrong.  
Jul 11, 2012 12:51AM

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.

Jul 11, 2012 12:51AM
No! They should not! These folks have paid their dues to society and they deserved to be honor and treated with dignity. The economy is so bad now and social security per person isn't that much. Why would you tax money they have paid into the system and the system has been using their monies to pay other people. What about the interest the government has made on the monies they have paid into the system? Will the government give that to them? No! And they shouldn't be taxed!
Jul 11, 2012 12:50AM

It is taxed if over a certain amount, most are at low income level.

Jul 11, 2012 12:41AM
NO!!!!!!!!!!!!!!!!!!!  Tax for being old enough to use the money you were taxed on?  My husband passed before using his--there was no refund.
It doesn't really matter because the Jack **** Party that is trying to push on everyone the Health Care will be Taxed as well so taxing anything they want to tax we the America People do not have a voice.
Jul 11, 2012 12:31AM
got news 4ya'll...roths are rite around the corner...all us "rich"bastards that saved 4our retirement,the Dems won't be able 2keep their hands off...luv how the truly rich give up their citizenship&leave,what a crock!!!!!
Jul 11, 2012 12:31AM
Liberal Trash want things like this to happen to us.
Jul 11, 2012 12:29AM

  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.

Jul 11, 2012 12:28AM

I am one of those 33% , paying 85% of my S.S. I'm not happy about it  but take consolation in realizing that my employers contributed 50% of my S.S. that i paid no tax on. 

Dave. H  

Jul 11, 2012 12:28AM

I am one of those 33% , paying 85% of my S.S. I'm not happy about it  but take consolation in realizing that my employers contributed 50% of my S.S. that i paid no tax on. 

Dave. H  

Jul 11, 2012 12:22AM
I know elderly couples worth a million and much more, they are the first to bitch about not enough, social security should have means tests.
Jul 11, 2012 12:21AM

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

Jul 11, 2012 12:17AM
Social Security is a tax.  It's used to fund every sole source, no bid, cost plus contract in government for every political buddy that Congress and the Administration can support- both Democrats and Republicans.  Salary tax withholding is a tax also.  I don't want to hear another moron politician say that 50% of the population pays no taxes.  In fact, most people I know pay more in withholding tax so they are not faced with a big tax bill on April 15. Those that pay taxes on dividends, stock options, bonuses, capital gains pay taxes after the fact not up front like most middle class families.
Jul 11, 2012 12:16AM
Jul 11, 2012 12:14AM
Jul 11, 2012 12:11AM
So tax the elderly and disabled on taxed income but leave Johnny 1%'s billions alone? The DNC and the GOP are just puppets in this charade. Rothchilds and Rockerfellers are the real issue and if you don't believe me keep sucking Koch.
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