Social Security Income Tax and the Double Taxation Issue, Again.
The issue of taxing Social Security benefits is a frequently recurring item in discussions on the program’s need for reform. As incomes rise, and since the thresholds for taxation are not indexed to compensate for this rise, more and more seniors find themselves faced with the prospect of paying federal income tax on their earned benefits. In fact, what was once only intended to affect a few high-income taxpayers has evolved to snare roughly half of senior taxpayers.
And to make matters even more severe, 13 states impose an additional income tax on Social Security benefits, thereby doubling the impact on older Americans. An article by The Motley Fool’s editorial staff, posted on foxbusiness.com, points out that more than 36 million taxpayers are at risk of this double-taxation, making it a severe impediment to retirement security. (Read the Motley Fool article here.)
Overall, the issue of taxation of Social Security benefits is an area that will likely get attention as reform measures take the stage in the 117th Congress. On the federal level, of course, it’s a pretty big issue, since taxation of retirement benefits accounted for nearly $35 billion in program revenue last year, but proposals are in play to address it as part of Social Security’s modernization. The Association of Mature American Citizens (AMAC), for example, has voiced its opinion via support of the Senior Citizens Tax Elimination Act (H.R. 3971), and other measures are likely to follow. Some states have also advanced actions to potentially eliminate or reduce local taxation of Social Security benefits. So, the issue is getting attention.
This posting is presented for informational purposes only and does not represent legal or financial guidance. Any opinions or interpretations presented are either those of the original author or, in the case of articles authored by the AMAC Foundation, are the opinions of AMAC Foundation staff, originally trained and accredited by the National Social Security Association (NSSA) and certified via the AMAC Foundation. Any links included in the article are valid on the posted date; socialsecurityreport.org cannot guarantee the duration of the links’ validity. NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity. To submit a question, visit our website (https://amacfoundation.org/services/) or email us at ssadvisor@amacfoundation.org. Because we are a non-profit organization, there is no charge for these services.