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Will Your Social Security be Taxable? - Forbes
In response to threatened revenue shortfall for Social Security in 1983, Congress enacted a law which required those with incomes over particular thresholds to pay income tax on half of their Social Security benefits. The thresholds set in 1983 were $25,000 for a single filer and $32,000 for those filing married/jointly. Relatively speaking, those thresholds were fairly high for those times, which meant that most Americans didn’t pay income tax on their benefits. But then in 1993, Congress – again in response to Social Security’s financing issues – added another income threshold for each tax filing status. After 1993, single filers with income over $34,000 and married filers with income over $44,000 had to pay income tax on up to 85% of their benefits. But still, at that time, it was mostly higher earners who were affected, with less than 10% of SS beneficiaries paying income tax on their benefits. That was then, and this is now.
The thresholds at which Social Security benefits become subject to income tax have never been adjusted for inflation. Thus, as inflationary pressure caused income to increase, more and more beneficiaries found themselves paying income tax on their Social Security benefits. Today, more than 40% of those who collect Social Security must pay income tax on their benefits, and that percentage will continue to increase as long as Congress neglects to adjust those tax thresholds. This Forbes article by Thomas Hager explains how taxation of Social Security benefits works, but also ominously suggests that matters will only get worse. Click here to read more.