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The Double Edged Sword of Taxing Social Security Benefits

Social Security benefits are subject to income tax for middle and upper income taxpayers.  But as Liz Weston points out in this piece, when benefits were made taxable in 1983 and then further in 1993, the brackets were never indexed for inflation.  In a way, it’s a sneaky way to raise taxes, as more people are ensnared each year (many unknowingly).  Initially just ten percent of beneficiaries were subject to tax; it is now over half.  Weston also notes, however, that the income taxes collected on benefits go into the Social Security Trust Fund, so any indexing (i.e. tax cut) would also exacerbate a worsening financial situation.  It is a sort of double edged sword.  Read full article here.

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