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Is Social Security Taxable?

These days thereâs a lot of doom and gloom about Social Securityâs solvency – or lack thereof. And regardless of whether you think Social Securityâs future is secure, the fact remains that you shouldnât plan on living exclusively off your Social Security benefits. After all, Social Security wasnât designed to make up a retireeâs entire income.

Still, many people do find themselves in the position of having to live off their Social Security checks. And even if you have other income sources in retirement, Social Security can make up a significant part of your retirement income plan. That’s why itâs important to know all the rules surrounding eligibility, benefit amounts, taxation and more.

Do you need help managing your retirement savings? To find a financial advisor who serves your area, try our free online matching tool.

How To Calculate A Social Securitys Spousal Benefit

If youre married to someone who works outside the home and contributes to Social Security through payroll tax, you might be entitled to a Social Security benefit based upon your partners income.

The maximum amount you will receive is 50% of their Primary Insurance Amount this is the monthly income they are eligible to receive at full retirement age . However, you will only receive 50% of this amount if you postpone filing until you are full retirement age- currently 66.

If you file for a spousal benefit before age 66, the percentage you receive depends upon your age. Theres a two-stage process as to how Social Security calculates the reduction and its based upon how many months ahead of your FRA you are filing:

For the first 36 months before age 66 that you apply for a spousal benefit, your check is reduced by 25/36 of one percent. For each additional month that you file early, the reduction is 5/12 of one percent.

The following example illustrates how this applies. It assumes that your full retirement age is 66 and your partners PIA is $2,000/month.

Theres a calculator on the Social Security website that allows you to enter your information to find out how your spousal benefit will be affected if you file prior to your full retirement age.

Here are some other things you need to be aware of when claiming spousal benefits:

Coming Up Next week: Social Security and divorce: What it takes to collect on your exs earnings history.

Social Security Cola 2023 Increase: Here’s When You’ll Get Your 87% Benefit Hike

Seniors and millions of other Social Security recipients in the U.S. will soon get their biggest benefit hike since 1981, with the pension program set to deliver an 8.7% cost-of-living increase in 2023.

The annual cost-of-living adjustment, or COLA takes effect with the December benefits, but those payments will be made in January 2023, according to the Social Security Administration. With the increase, the average benefit check will rise more than $140 to $1,827 a month, compared with the typical benefit of $1,681 in 2022.

The Social Security Administration adjusts payments annually based on the inflation rate, which this year has spiked to its highest levels in four decades. Seniors lost purchasing power during this year since the 5.9% they received in 2022 is well below this year’s rise in prices. About 4 in 10 seniors said they drained their emergency savings to stay afloat this year, according to an October survey by the advocacy group the Senior Citizens League.

“Anytime they go through a loss of buying power, that means they are exhausting other retirement resources, like savings, or may be putting more on credit cards or they might turn to safety net programs,” said Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League.

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Withdraw From Retirement Accounts Before Signing Up For Social Security

One way to lower your combined income is to start taking withdrawals from IRAs and 401s before you start collecting Social Security. You can begin taking penalty-free distributions as early as age 59 1/2 and even 55 in some cases. Theoretically, you could withdraw all of your retirement account money before you start collecting Social Security, but thats probably not the best long-term strategy if you want to live comfortably.

Social Security For The Disabled

Social Security Spreadsheet Fun

People who are disabled, are dependents of retired or disabled workers, or are surviving spouses/children may also receive benefits. Note that this is supplementary information and that the Social Security Calculator only provides calculations for retirement benefits.

The SSAs definition of disability refers to total disability, so partial or short-term disabilities are not qualified for benefits. Under the SSAs rules, a person is disabled only if they meet all of the following conditions:

  • They cannot do work they did before
  • The SSA decides that they cannot adjust to other work because of their medical condition
  • The disability has lasted or is expected to last at least one year or to result in death

Benefits usually continue until beneficiaries are able to work again. Disability beneficiaries that reach full retirement age will have their benefits converted into retirement benefits, with the amount remaining the same. It is against the law to receive both disability and retirement benefits at the same time.

Social Security Disability Insurance

Supplemental Security Income

In some situations, it is possible to receive both SSDI and SSI. This usually happens when a qualified application for SSDI is granted low enough an SSDI benefit to make the applicant also eligible for SSI.

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Also Check: Are Social Security Benefits Taxable In California

Who Could Be Affected

People in the 10%, 12%, and 22% federal tax brackets could be affected by the high marginal rate, especially those with above-average Social Security benefits. If youre part of this group, consider working with a tax professional to fine-tune your retirement expenses, income, and tax projections. Doing so could help you determine whether additional planning or adjustments may be necessary.

Suppose you and your spouse collect $70,000 a year in combined annual Social Security benefits and your only other income is $65,000 of distributions from individual retirement accounts . This makes your provisional income $100,000. At that level, you havent quite reached the 85% cap on taxability of Social Security.* Now suppose you take an additional $1,000 from your IRA. You might expect to pay $220 more in taxes since youll be in the 22% bracket. However, since that $1,000 results in $850 more of your Social Security benefits being subject to tax, your tax bill increases by $407 . Your marginal tax rate is really 40.7% at this point, but at higher income levels, it eventually goes back down to 22%. If there are steps you can take to minimize the income taxed at this level, they are worth considering.

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Calculator: How Much Of My Social Security Benefits Is Taxable

September 15, 2022Keywords: calculator, retirement, Social Security, tax planning

Social Security benefits are 100% tax-free when your income is low. As your total income goes up, youll pay federal income tax on a portion of the benefits while the rest of your Social Security benefits remain tax-free. This taxable portion goes up as your income rises, but it will never exceed 85%. Even if your annual income is $1 million, at least 15% of your Social Security benefits will stay tax-free.

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How Do I Get Child In Care Spousal Benefit Backpay

I was declared disabled at age 14 and started receiving dac ssdi benefits through my Dads work record. At that time , my dad was alive and collecting retirement benefits. My mom received child in care spousal benefits from my Dads work record. At age 19, during a CDR, the SSA ruled that I was no longer disabled, and my disability benefits ended, as did my Moms Child in care spousal benefits. I appealed this.

I am 26 now. Just two weeks ago, my appeal was successful, and ssa decided that I actually have been continuously disabled all this time since age 14. I do not yet have access to what code was used to justify disability, I believe it would be solely physical in nature though, no mental impairment. My mom has lived in the same house as me this entire time, providing care that falls under the child in care definition . She has not earned income during this time. She has been under retirement age this entire time.

I received an ssa letter recently that my benefits would be half of my Dads retirement payment. However, I believe that this is wrongly calculated. Dad would get his full amount, and me and my mom should evenly split the remaining 70-80%ish, meeting the maximum family benefit. So my check shouldnt be half, if they had the spousal benefits correct. I dont know what the maximum family benefit is either, not sure how Im supposed to know that. The calculation is awful.

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Can You Switch From Your Social Security Benefit To A Spousal Benefit

How to Calculate Your Social Security Benefits

Yes. If you begin collecting your own Social Security benefits at age 62 but your spouse keeps working for another few years, you are eligible to your spouses benefit after they retire if it is higher than your own. Thus, your spouse will get the maximum amount and you can file for 50% of the amount your spouse would receive at full retirement age.

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Last Full Year Of Work

Secondly, the last full year of work is essential for estimating the amount you are entitled to receive from social security benefits. Similar to how this calculator adjusts to your year of birth, the last full year you worked will have a dramatic effect on your potential disability earnings. The manner in which this adjustment takes place is somewhat arbitrary, especially since this calculator provides a basic estimate.

If you have not worked in the last 20 years, this calculator will not be able to accurately estimate what your benefit amount could be. Generally, individuals who have lost their ability to work normally in more recent years are able to collect more benefits than those who have lost this ability farther in the past. However, this is not always the case.

Yearly Income

Like any ordinary government assistance program, annual income plays a huge factor in determining how much benefits you can qualify for. According to this calculator, individuals who earn more are usually able to earn more benefits. This is evidenced by the primary model expressed by the calculator.

An individual born in 1968 that earns $3,000 annually, who last worked in 2017, would be entitled to receive $587. On the contrary, a person with the same background information that earns $5,000 annually is estimated to obtain $636 in social security benefits.

Company Information

Disability Help Center San Diego 1833 Fourth Ave. San Diego, CA 92101

State Taxation Of Social Security Benefits

In addition to federal taxes, some states tax Social Security benefits, too. The methods and extent to which states tax benefits vary. For example, New Mexico treats Social Security benefits the same way as the federal government. On the other hand, some states tax Social Security benefits only if income exceeds a specified threshold amount. Missouri, for instance, taxes Social Security benefits only if your income is at least $85,000, or $100,000 if you’re married filing a joint return. Utah includes Social Security benefits in taxable income but allows a tax credit for a portion of the benefits subject to tax.

Although you can’t have state taxes withheld from your Social Security benefits, you generally can make estimated state tax payments. Check with the state tax agency where you live for information about the your state’s estimated tax payment rules.

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How Much Do You Get For Social Security Retirement

How much you get for Social Security retirement benefits will depend on a number of factors, including your income, how long you worked and when you retired. One thing youll need to consider when getting your retirement benefits or when planning for Social Security retirement is that it may be taxed.

If you have a combined income but are filing as an individual, your benefits arent taxed if your benefits are below $25,000. If your income is above that but is below $34,000, up to half of your benefits may be taxable. For incomes of over $34,000, up to 85% of your retirement benefits may be taxed.

For the purposes of taxation, your combined income is defined as the total of your adjusted gross income plus half of your Social Security benefits plus nontaxable interest. Other wages that may be applied to this include self-employment income, wages, capital gains and dividends or other investment income from interest, annuities, pensions, rental property profits, municipal bond interest and withdrawals from retirement accounts such as IRAs, 403 and 401 accounts. Roth IRA withdrawals dont count toward combined income.

Who Can Use The Retirement Estimator


You can use the Retirement Estimator if you have enough Social Security credits to qualify for benefits and you are not:

  • Currently receiving benefits on your own Social Security record.
  • Waiting for a decision about your application for benefits or Medicare.
  • Age 62 or older and receiving benefits on another Social Security record.
  • Eligible for a Pension Based on Work Not Covered By Social Security.

If you are currently receiving only Medicare benefits, you can still get an estimate. For more information, read our publication Retirement Information for Medicare Beneficiaries.

If you cannot use the Retirement Estimator or you want a survivors or disability benefit estimate, please use one of our other benefit calculators.

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Income Tax Calculator: Estimate Your Taxes

If you wait until January 2023 to start drawing your benefits, then a smaller reduction percentage will be applied to your benefit rate, but that wouldnt amount to as much as an 8% increase. 8% is the annual increase caused by delayed retirement credits , which can only be earned between a persons full retirement age and 70. The actual difference between your age 62 and age 63 amounts would be less than 8%.

You may want to consider using my companys software Maximize My Social Security or MaxiFi Planner to ensure your household receives the highest lifetime benefits. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry

Is My Mom Eligible To A Widows Benefit?

Hi Larry, My dad died in 2015 and he was not on Social Security. He would be 60 this September. Would my mom be eligible to receive a widows benefit based on my deceased fathers Social Security record? Thanks, Henry

If she meets these requirements, she can be eligible for widows benefits. If she applies and SSA finds that shes not eligible for some reason, theres no penalty for applying. Best, Larry

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More Than Just Income: The Social Security Spousal Benefit And Medicare Coverage

If you are eligible for a Social Security spousal benefit, you are also entitled to premium free part A Medicare at age 65. The catch?

Youre entitled to Medicare only if your spouse is at least 62 years old.

If you are more than 3 years older than your spouse, you may have to buy Medicare Part A until your spouse turns 62. Thats when your premium-free benefit would start. The Part A monthly premium is $422 in 2018.

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Social Security And Medicare Taxes In 202: Whats New And Whats Unchanged

The bad news is that increases in 2023 Medicare and Social Security taxes will hit some employees and self-employed individuals. But the good news is that beneficiaries will be seeing their benefits increase by the greatest amount in 40 years.

6 minute read

The bad news is that increases in 2023 Medicare and Social Security taxes will hit some employees and self-employed individuals.

But the good news is that beneficiaries will be seeing their benefits increase by the greatest amount in 40 years. So its a mixed bag.

The Simple Formula For Figuring Out Dual Entitlement

Calculating the maximum Social Security tax you can pay

Whats critical to understand with dual entitlement is that these are really two separate benefits all rolled into one. The easy way to understand how this may apply in your situation is a simple formula:

= Spousal Payment

If we go back to the husband and wife in our example, we know that half of the higher earners benefit amount is $1,000. We can then subtract the lower-earners benefit amount of $800 to see what the spousal payment would be: $200.

Now, you may be thinking, Devinif the result at the end of this calculation is still one half of the higher-earning spouses benefit, why does it matter?

Thats a good question. Heres my answer: its important to know the formula and how the calculation works because your own benefit and your spousal payment are NOT calculated the same when it comes to reductions for filing early or increases for filing later.

Let me show you what I mean.

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Do You Expect To Have Additional Sources Of Retirement Income Beyond Social Security

Continue saving in the coming years.

Social Security wont replace all of your pre-retirement income. On average, Social Security replaces 40 percent of a workers income. That means your retirement savings, pension, 401, or Individual Retirement Account will need to fill the gap. Claiming at your full Social Security benefit age or later can minimize this gap and maximize your monthly benefit. If you claim before your full retirement age, your monthly benefit could be reduced by as much as 30 percent.Learn more about saving for retirement.

You have an opportunity to continue growing your money.

If you can, get the highest monthly Social Security benefit possible by claiming at your full Social Security benefit age or later. If you claim before your full retirement age, your monthly benefit could be permanently reduced by as much as 30 percent. Also, take advantage of catch-up contributions to your 401 or Individual Retirement Account . Lastly, avoid losing your retirement savings to unnecessary tax penalties. If you withdraw your 401 or IRA savings before age 59½, you will likely face an early withdrawal penalty.Learn more about how retirement savings grow.

Its a perfect time to start saving.

Its never too late to start saving!

There are many ways to plan for a secure retirement outside of Social Security.

Its never too late to start saving!

A type of retirement savings account offered by employers to help their employees save for retirement.

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