Social Security Question: Ask Rusty – Will My Social Security Services Ever Be Tax Free? – The Coastland Times
Social Security Question: Ask Rusty – Will My Social Security Services Ever Be Tax Free?  – The Coastland Times

Social Security Question: Ask Rusty – Will My Social Security Services Ever Be Tax Free? – The Coastland Times

By AMAC Certified Social Security Advisor Russell Gloor, Association of Mature American Citizens

Dear Rusty: If we take our social security at our full retirement age (66 years and 6 months for both of us) and we both continue to work, what are the income tax consequences? Is there an age where we can still work and take out social security without tax consequences for our benefits? Signed: Overtaxed Par

Dear overtaxed couples: Regardless of when you claim your Social Security benefits, whether those benefits are subject to federal income tax depends entirely on your income as reported to the IRS. This is true even if you collect social security benefits after you reach your full retirement age – there is no age at which SS benefits are exempt from federal income tax. That is how it works:

Taxation of your social security benefits depends on two things – firstly the size of your combined income from all sources (known as your modified adjusted gross income or “MAGI”) and secondly your income tax application status (whether you file your income tax individually or together as a married couple). Your “MAGI” consists of your adjusted gross income (AGI) on your tax return, plus half of your social benefits received for the tax year, plus any other non-taxable income you may have had.

If your MAGI for the tax year exceeds certain thresholds, then some of your Social Security benefits are taxable regardless of your normal IRS tax rate. If you as a couple file your income tax as a “joint marriage application” and your MAGI is over $ 32,000, then 50% of your social security benefits received during the tax year will be part of your total taxable income regardless of the standard tax rate for your income . However, if your MAGI as a couple for the tax year exceeds $ 44,000, up to 85% of your SS benefits will become part of your total taxable income. If your MAGI as a married couple is less than $ 32,000, your social security benefits are not taxable.

For those who file their federal income tax as a single person, the thresholds are lower. If your MAGI as a single files is $ 25,000 or less, your Social Security benefits are not taxable. However, if your MAGI as a single branch is more than $ 25,000, then half of your social security benefits will be received during the tax year as part of your total taxable income, and if your MAGI as a single branch is more than $ 34,000 then up to 85% of your benefits for the tax year becomes part of your taxable income. But a warning to those who are married but choose to file tax “married – filing separately” – if you file separately and live together at any time during the tax year, the threshold for taxing social benefits is zero.

So federal taxation of your social security benefits depends entirely on your combined income from all sources and your income tax status – your age does not come into the picture at all, even if you charge social security benefits after your full retirement age. Be aware, however, that a dozen U.S. states levy an income tax on social security benefits, so you should check the tax laws of your state of residence to see if some or all of your social security benefits will be taxed by the state in which you live.

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