Income taxes on Social Security unpopular, but raise a lot

Few things about Social Security get seniors more upset than paying income tax on part of their benefits.  Benefits became taxable first with a change in the law in 1983 followed by a second change in 1993.  Under the taxation of benefits, single taxpayers whose modified adjusted gross income, plus one-half of their Social Security benefits, surpassed $25,000 ($32,000 for couples filing jointly) would have up to half of their benefits exposed to ordinary federal income tax.  A second taxation tier was added in 1993 allowing up to 85% of an individuals’ or couples’ benefits to be taxed with thresholds of $34,000 for singles and $44,000 for couples filing jointly.  While the whole concept is unpopular, the revenue generated is without question helping a program headed for partial insolvency in 2034.  Many seniors would likely take a few more dollars in take home pay now, but that would come at great expense to their children’s and grandchildren’s ability to access the program.  As it stands, every beneficiary’s benefits will be cut across the board by 21% in 2034 without changes by Congress before then.  Read more about the revenue income tax generates in the full piece here by Sean Williams.

AMAC is resolute in its mission that Social Security be preserved and modernized and has gotten the attention of lawmakers in DC, meeting with a great many congressional offices and their legislative staffs over the past several years.  While AMAC philosophically agrees with the removal of income tax, a compromise to raise the thresholds is a better solution to the solvency of the program.  Read AMAC’s Social Security Guarantee Plan here.



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Comments On This Topic

  1. I am still working and my survivor benefits are fully taxed. I am turning 64, so I have to work another year at the very least. Why would they tax it. I can only draw benefits for 6 months out of the year. And they tax that. I am a 911 dispatcher. I have been doing this job for 24 years. I make close to $29,000 a year on the high side. I know. It’s NOTHING compared to the liability and stress that comes with the job. But My Husband made close to $50,000. He died at 57. They held benefits for 6 months before sending me any money. Then it was around $ 975. THAT IS A JOKE. It should be that much a WEEK. Then they TAX THAT. The lady in the office said that is all you and draw because you work. I said are you kidding me? It takes every cent I earn and whatever you decide to give me of my husbands money and penalize that because of my income and then TAX IT on top of that. That money already had taxes paid on it. MY HUSBAND paid it every week. I need that money. It is not GIFT from the government. My husband EARNED that money and paid it in. I do know that there are MANY in the same spot as me. And it should NOT be happening. Especially when illegals go about bragging that they get $2500 and $3000 and UP in Social Security benefits that they have no business getting. I want all that money Obama stole from the fund to be returned with INTEREST. It’s not right that he took what did not belong to him. I told the goof ball in the local office, “I bet I could go tie a rag on my head and get what I need to live”. But I am an elderly white female widowed veteran. I can’t get it. What I would like to do is draw the entire amount at once on both my dead husbands, and save mine so I can retire on that and my work retirement. Then maybe I can live decent.

    • You have a lot going on here Debbie. I’ll try to clarify.
      First of all, by collecting your survivor benefit earlier than your full retirement age, the amount of that benefit was reduced. If you took it at age 60 (the earliest you could have) it would have been reduced by about 28.5% from what you would have gotten by waiting until your full retirement age to claim it.
      Taxation of Social Security benefits is based upon your “combined income”, which is your income from working and investments, as well as 50% of your Social Security benefit. If you file as a single and your combined income is over $25,000, up to 50% of your SS benefit may become taxable income; over $34,000 then up to 85% of your SS benefits may be taxable. An unfortunate reality, but the law nevertheless.
      The survivor benefit you get is based upon the SS benefit your husband was entitled to at the time of his death. Even though he was making close to $50,000 when he passed, his SS benefit at his death would be much smaller than that because the formula used to determine benefits only replaces a portion of his lifetime average monthly earnings. His benefit amount was computed from his lifetime earnings, not what he was making when he passed.
      Because you work and are collecting benefits before your full retirement age of 66 & 2 months, you are subject to Social Security’s annual “earnings test”, which means that if you exceed the annual earnings limit ($17,640 for 2019) they will withhold $1 for every $2 you are over the limit. That will continue until the year you reach your full retirement age when the limit goes way up and the penalty is less. Then when you reach your full retirement age the earnings limit goes away.
      Illegal aliens cannot collect Social Security benefits, regardless of what you might hear. Social Security benefits, by law, can only be paid to US citizens & legal non-citizen residents who qualify by paying Social Security payroll taxes, or by being the spouse of someone who has. That’s not to say they don’t take advantage of other social benefit programs at the State level, but they cannot collect Social Security benefits.
      President Obama, nor any other President or politician has not “stole” the money from Social Security. Social Security revenues must, by law, be used only for Social Security purposes, and any surplus revenues must be deposited in the Social Security Trust Funds which now contain $2.895 trillion in reserves which can be used only for paying Social Security benefits.
      So Debbie, while I might sympathize with your financial situation I can only relate to you the Social Security rules as they are written. You may want to go to this website to see if there are other non-Social-Security benefits which you could take advantage of:
      Russell Gloor
      AMAC Social Security Advisor

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