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About Taxation of Social Security Benefits - USA Today
It comes as a surprise to many new Social Security beneficiaries, but Social Security benefits may be taxable, depending on your combined income from most sources (Roth IRA distributions don’t count). Taxation of Social Security benefits started in 1983 when Social Security was in financial trouble and needed additional revenue, but the law enacted neglected (intentionally or not) one key feature – a provision to raise the thresholds at which Social Security becomes taxable income. As a result, those thresholds haven’t changed in four decades, each year ensnaring more and more people by taxing their Social Security benefits. What started as a change which required about 10% of beneficiaries pay tax on their benefits now results in nearly 50% of beneficiaries paying income tax on their Social Security benefits. This is all discussed thoroughly in this USA Today article by Kathleen Wong.
Also, if you’re unsure about how these basics apply to you, or if you have any questions about your individual situation under Social Security, note that the AMAC Foundation provides a free-to-the-public advisory service to help Americans navigate the complexities of this program. Learn more about it here…