Surprise! Your Social Security Benefits Can be Taxed
It comes as an unwelcome surprise to many new Social Security beneficiaries, but the truth is your monthly benefit may be subject to federal income tax. In fact, it’s not only possible, it’s likely, since more than half of current beneficiaries find at least a portion of their benefit subject to tax at their normal rate. And it’s not a small piece of the Social Security revenue stream, since it added about $38 billion last year to the program’s Trust Fund reserves. TDAmeritrade’s Rebecca McClay provides a recap of the manner in which this tax liability occurs, and provides some strategies to be considered in your financial planning processes that might help you minimze the tax bite waiting for you. Check her article out here…
Although the subject of Social Security benefit taxation typically generates a fair amount of grumbling among those affected by it (and particularly among those who did not anticipate it!), it’s unlikely that Social Security reform will result in its removal from the process, given its significance as a revenue generator. What needs to be looked at, though, is the fact that the income limits used to determine tax liability have not been adjusted for over three decades. As a result, a provision that was originally intended to affect just a few now affects the majority and is growing each year as inflation drives income levels upward. And yes, it is a form of “double taxation.”
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