How is Your Social Security Benefit Taxed in Retirement?
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- čas přidán 30. 09. 2021
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It's no secret that the Social Security system can be complex.
One of the most complex parts of Social Security is how your benefit will be taxed. When S.S. was first put into law, it was said that it wasn't taxed and would never be.
Well, that changed in 1983. Now everyone's benefit will potentially become taxable.
But exactly how much of your benefit will become taxable will depend on the
Social Security Tax Calculation Formula or otherwise known as provisional income.
Understanding this formula is critical to building a tax-efficient retirement income.
In this video, we'll walk through step-by-step examples showing exactly how to determine how much of your Social Security benefit will be taxable and a few strategies you can use to keep that taxable number small.
If you have any questions, don't hesitate to ask them in the comments below.
#SocialSecurity #retirementincomeplanning
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There's nothing confusing about the taxes on Social Security. You're ultimately paying taxes on top of the taxes you've already paid. See, it's simple....... and an example Government Criminality.
You were not taxed on the employer's contribution, or the interest involved.
@@SandfordSmythe employer's contribution what is the difference? When you work for X company You pay taxes and they pay their portion too? Isn't it or they make us believe that? We already pay and if they don't their contributions it should be our business right? We should pay taxes No More why?? Bc of age group and we worked for too many years!! That should be exempt.
Free stuff that everyone thinks their entitled to is very expensive.
First, 85% of your SS is the max that can be taxed, so worst case, 15% will not be taxed. Second, if SS is all the income you have, there is ZERO tax on it. In fact, you can have a small amount of other income, such as an IRA, and you could still have no tax. If you plan your distributions correctly in retirement, you could avoid paying taxes for the most part.
On this subject you have the clearest explanation among all the other videos I have seen. Thank you very much.
Thank you for the breakdown! This is by far the best retirement and tax planning CZcams channel out there.
Thanks Scott!
Thanks so much for your video. I loved your video❤❤❤, very well explained. Finally, I understood how they calculate on SSA
Absolutely stunning in the way you layed it out. Much Thankks!!!!!
Finally, a video of this process that makes sense.
Thank you. Finally, someone explained this correctly, in a manner I can understand......
Excellent explanation. I didn't know about the 85% tax range. Thank you for the thorough examples.
Thank you so much for this great 👍video. I never know before!!!
The best explanation EVER. Thank You
EXCELLENT explanation… thanks and subscribed !
Thank you Rob!
Very eye opening indeed! Nice breakdown and a thorough, easily understood explanation which is, as always, a trademark of your videos! Thank you!
Thanks Peter!
Thank you so much for this very understandable explanation!!
You're very welcome! Glad it helped
Good info with realistic numbers explained in a simple to understand fashion
I'm not sure why someone would be confused by your video. I have been trying to find a good resource to help me understand how Social Security is taxed and this is the best information I have found. It was very thorough, showing several examples of likely situations people would have. It would be easy to plug in your own numbers to come up with the taxable income. I had found other sources of how to figure the what you are calling Provisional Income but I did not understand if you could apply deductions to this taxable amount. The answer you gave was yes, you can. I had thought that any income you received that was not SS was taxed at 50%. Is that just if it is a W2 wage? That is where I still am confused, or did I get incorrect information.
Great video!!
Thank you Julie! There are no deductions that will lower Provisional Income. Provisional Income is basically a formula that just determines your SS taxability. Some withdrawals are not counted in Provisional Income, however, like Roth Withdrawals.
Income that is received that is not Social Security is taxed at its normal rates. So W2, Trad. IRA, Pension, etc. income would be taxed at normal income rates. Cap Gains are taxed at Cap Gain rates. These can all force more of your S.S. to be taxed but are not taxed at 50%. Maybe I'm misunderstanding your question?
This was a great example, mainly because the numbers you are using is what I will be receiving. I could not understand how they came up with the tax liability until you detailed it out. Again, fantastic job with this video.
Excellent presentation.
Let me get this straight, I’m single and make 30k per year from Walmart so I get taxed on up to 50% of my SS and paying in to SS again because I’m working? WTH?
Great video dear, very helpful
Great video!
Great video, thank you so much! However in your examples, only half of the ss income is included into taxable income, which means, even when we say 85%, that is 85% of the half ss income, not 85% of the full social ss income?
Best explanation so far
Thank you so much!
SS was a tax to begin with and now it’s taxed when they give it back, what a scam.
We can view SS as a pre-tax "forced savings" instead of a tax, much like a Traditional IRA or annuity (with nonqualified premium) . We do get the money back when we retire, and this "withdrawal" is subject to taxation. Of course, this assumes one lives pass the retirement age to receive the social security benefit, and hopefully lives long enough to out live what is paid into the SS system.
thank you for your video's. Im going to draw and probably retire sometime midyear. Do they get the AGI from my financial status on that day or do they fall back to the 2021 tax returns ? My spouse is still gonna be working so we will be in the 85% area Im sure, just trying to get an idea of the amount. Thank you
Best explanation!!. Thank you! I going to retire this year. Me and my wife make $110,000 per year. My S.S income is 12000 per year and my taxable income is $120,200.
As far as tax for S.S $10,200 is taxable. Can you tell me how much actual tax I have pay for S.S? THANK YOU again!!!
I am expecting pension of.about $643.00 from my employer plus Society Security about $700 per month. How do I calculate taxes this income?
After retirement getting Social Security, I can work and what kind of tax have to pay and what amount after the security Social Security pay tax. Please let me know thank you.
My question is I discovered my Dad owned 100 shares of stock from utility company SPIRE Inc. If I take ownership these stock how will value of stock affect my taxes?
I thought IRA was already taxed? Do they tax me again if I withdraw on my IRA?
Is there a chart for head of house hold filing?
Thank you.
What about standard deduction. Where does that play in ?? Not clear in video.
I just got approved for SS payments (@ 65), got my first check last month. Birth month is January. My FRA is 66 and 8 months, so this being 6/2023, 14 or so more months to go before FRA. Can I trade stocks and make money in my brokerage account without penalizing/threatening my SS?!?!? I know I can make $21,400 per calendar year, or around $1733 a month. The money made in the brokerage account is all short term capital gains so will it be considered as wages/salary or capital gains and not affect the SS?!?!? I don't mind paying the federal taxes, I just don't want to jeopardize my SS!!!
The question of how much of your SS gets taxed and by what rate when you are REAL savers that have several million in savings that derive a large sum in dividends and capital gains for taxable income, NOT including distributions you have to take fro 401k's, IRA's. It's like our pension payment we receive goes to just pay the taxes on the investments.
Was these examples for only for 10% tax brackets?
I’m confused; I thought social security don’t touch your IRA ? I have a Roth IRA and Roth 401k
We already paid taxes when we were working at a job…why is the government double dipping on social security
You are getting a federal welfare check. Stop complaining!
What about deductions?
For example #3, their gross taxable income before deductions would be IRA withdrawal 15,000+13,225 = 28,225?
Correct.
i have stocks that i have owned over a year that i sold--you did not talk about capital gains that fits into the picture
Does turbo tax calculate it the same way and how does standard deduction married deduction affect this thanks .
Yes, all tax prep software programs use this calculation to get the provisional income, the taxable SS amount, and then the total taxable income. The deductions (standard or not) are then applied.
My wife still works ($) + my pension ($) + ss (50%) is the total income filing married???
What about the Roth distributions taken ? How does it treated in provisional income.
Roth distributions do not count toward provisional income.
Can you please add an example using $30K social security + $100K taxable income, where provisional income = $115K.
I see there is another comment below from Tein Bao with the same question.
Question: How is a provisional income of $115K used in the married table to calculate the amount of taxable social security of $25,500 ($30K SS x 85% = $25,500)?
When is it simpler to just multiply the SS amount ($30K) by 85% to get the taxable SS amount ($25,500), rather than use the married table calculations in the video?
Answer: Patrick's answer to Tein Bao's question below also answers my question.
In summary, the taxable SS amount is the SMALLER of either
a.) the result calculated from the formula in this video, or
b.) 85% of the SS Benefits ($25,500)
very clear thx. one question i have is...My wife still works and i will be collecting SS benefits this year, so i am assuming in this scenario her income will impact what my SS taxation equation will become?
If you're filing as married filing jointly, then yes - her income is included in your total provisional income.
Yes, it is more desirable to have a larger social security benefit due not only to the favorable taxation but also for the inflation adjusted treatment.
Now, SS benefits are subject to changes by Congress. So, this makes it volatile as the deal can change at any time or cut the benefit as needed. Same with portfolios, they are at wimps of the markets. Risk Volatility is a problem in both cases. SS benefits are the lesser of two evils.
Are they ever going to change those income tables? They are ridiculously low.
Great video. What's the most you could earn (either single or married filing jointly) while receiving SS without having to pay any income tax?
Great question. It depends entirely on how much you have coming from Social Security
Seniors should get their big snouts out of the Federal welfare trough. Social Security is too expensive
The money taken out each paycheck for SS is not really a tax. Because your supposed to get that money back and more. (67yrs old)
There should be no taxes paid by our grandparents, they paid enough already. Who decides that just because they are a single person their expenses are not real. ? The mortgage or the rent , utilities , are not based on single or married , If with their body aches and pains they are lucky enough to get a very much needed job they should NOT be penalized with paying taxes .
Talk about RMDs and how that affects the equation
they're taxable income, so you add them to the first part. the exception is if you use QCD to donate to charity, in which case the amount you took out counts toward the RMD amount but isn't counted as income and you get to deduct it as a charitable deduction. I think the qcd is limited to 100k though, so an amount over that is going to add to your taxable side.
I have $23,000 yearly in pension benefits and a total SSDI benefit of 19,500 yearly. How much federal taxes would I have to pay the IRS?
Provisional income = $23,000 + (50% x $19,500)
Provisional income = $23,000 + $9,750
Provisional income = $32,750
Taxable SS:
Single table = $32,750 - $25,000 = $7,750 taxable SS
Married table = $32,750 - $32,000 = $750 taxable SS
Total taxable income:
Single = $30,750 ($7,750 taxable SS + $23,000 pension)
Married = $23,750 ( $750 taxable SS + $23,000 pension)
Taxes:
Single = $3,491 taxes
Calculation:
: $995 ( $9,950 x 10%)
+ $1,296 ($20,800 x 12%)
= $3,491 ($30,750 taxable income)
Married = $2,452 taxes
Calculation:
: $1,990 ($19,900 x 10%)
+ $462 ( $3,850 x 12%)
= $2,452 ($23,750 taxable income)
,
This is not working out for the following single person.
60,000 social security of which is 30,000 (%50) plus 90,000 in pension = 120,000 provisional.
4500 for the 50% of the first tier of taxable and 73,100 for the second tier of taxable (120,000-34,000 = 86,000 resulting with 73,100 at %85)
Based on your example, tax on SS is $77,600 (4,500 = 73,100) which is grossly over the 60K of SS. How an it be more than the total SS?
What is wrong here?
There are so many people who leave only SS Income, no addional income any kind. I am one of them. My yearly benefit was $20.280,- . What about this income level taxation? No videos talking about this situation.
If all you have is Social Security then you will owe no tax on it.
I have them take 7% out of my checks each month,
bullshit when i retired 3 yrs ago and i owe taxes $9,400 based 56k a year awhile i work for 90k and pay taxes only 2k.
Thanks for your video. I have an example with SS income 15,000 and tax withdrawals 75,000. So I calculate:
Provisional income: 82,500
50% Range: 6,000
85% Range: 32,725=.85*(82,500-44,000)
Range total: 38,725
Taxable income: 113,725=75,000+38,725
113,725 is greater than our real income 90,000 (15,000+75,000)???
May you tell me where I calculate wrong. Thank you.
Social Security's taxability is capped at 85% of your SS benefit. So the taxability of your SS benefit would be capped at $12,750
I am still confused about that. Anyway, thank you for your answer.
@@2276sonnguyen I am somewhat confused by your example, but it seems to me that the 75,000 you are including in your calculations has been used twice rather than once. It seems to be included in your provisional income (82,500) AND added into your taxable income. I am not sure, but it seems unnecessary to add it to the taxable income. I am certainly no expert at this, but you may want to check your math in that area and ask yourself if you have used that 75,000 figure too often. Watch the video again and see if his calculations and yours are done in the same manner.
When the formula calculates a range total ($38,725) that is more than your actual social security ($15,000), then ignore the range total of $38,725 and simply multiply your social security by 85% to get the actual taxable social security: (85% x $15,000 = $12,750).
Then taxable income = $87,750 ($75,000 taxable income + $12,750 taxable SS)
What happens when the 85% range is greater than the SS benefit? Said another way: use income of $150K and SS benefit of $24K as an example. Still graduated?
Great question Nadine. At most, only 85% of your S.S. benefit can be taxed. So once it provisional income is high enough that 85% of your benefit is taxed, you have maxed out SS taxability
@@SafeguardWealthManagement Thanks for the follow up. Great video and appreciate all the back up charts to make your explanations clear!
@@SafeguardWealthManagement Is 85% of ALL of a SS benefit above a provisional income of $44,000 taxable, or is 85% of HALF of a SS benefit above a provisional income of $44,000 taxable?
In any other pension there is a taxable basis of money in the fund that has already been taxed before it was contributed. This money is not taxed again when it is withdrawn. SS is treated as welfare because your taxes depend on your current income without regard to how much after- tax money you paid into the system as payroll taxes. Originally SS was not taxed at all. Thank Biden for voting to tax your SS check when he was a congressman.
what happens to your 12000.00 personal exemption?
Hey Don, your standard deduction (I think you are referring to) will be subtracted from your overall taxable income. It is not included in the Provisional Income formula.
Where do Roth withdrawals fall in these examples?
Conversions would count as gross income and thus raise your provisional income dollar for dollar
@@SafeguardWealthManagement But withdrawals from a Roth account are tax free. They would not be used to calculate provisional income, nor would they be taxed at all.
@@rudged123 my apologies. I misread the comment. Roth Withdrawals would be excluded from provisional income assuming they are penalty-free withdrawals. Sorry for the misunderstanding.
Anyway you put it, this is criminal.
As always, great video! I do have a question when filing as married couple. Let's say their income from 401K and Pension is $200K and $60K from social security. Hence their provisional income is $230K ($200K + $30K, 50% of SS). Using your formula, SS tax between $32K and $44K is $6K, and greater than $44K is $158,100 ($230K - $44K = $186K, then $186K × 85% = $158,100)
So $6,000 + $158,100 = $164,100 is their SS tax? In addition, their total tax prior to the standard deduction is $164,100 + $200,000 = $364,100. Is this correct? Thank you in advance for your time!
Your $164,100 is not SS tax, it is the taxable portion of the SS Benefits. However, when this taxable portion of SS Benefits calculated from the formula as illustrated in this video is higher than 85% of the SS Benefits itself, in your example, it is 85% x $60,000 = $51,000, then the higher $164,100 is not being used. It is the smaller of either the result calculated from the formula in this video, $164,100, or 85% of the SS Benefits, $51,000. So the conclusion is, $51,000 of your $60,000 SS Benefits is taxable, and it is being added to your $200,000 to arrive at $251,000 as your AGI.
@@patrickh9910 In the video you say that the benefit is taxed based on the tiers you fill. Would this example then be $6000 taxable (32 to 44 range) + $13,600 (60,000 - 44,000 *.85)? for a total of $19,600 taxable? Thanks
@@jdtravelers1361 Correct Formula: This example would then be $6000 taxable (32 to 44 range) + $158,000 (230,000 - 44,000 *.85), for a total of $164,000 taxable SS. Note: In the formula above, use the provisional income of $230,000, not $60,000.
For the taxable SS, use the SMALLER of $164,000 in the formula, or $51,000 ($60,000 x 85%). Since the smaller number is $51,000, the taxable SS is $51,000 (not $19,600).
With the large COLA increase in 2022 did the provisional income brackets change also? Or will you be left with being able to take out less from retirement accounts to not get hit with the tax torpedo?
Unfortunately, no. Provisional income brackets haven't adjusted since 1983 and likely will not adjust in the future.
I need help; 3 degrees and I still need help :)
THANKS REAGAN👿👿👿👹👹👹
The question is, how do we stop this right now, this is insanity.
You are getting a Federal welfare check. Stop complaining.
@@jacksummer854 Idont get no fucking welfare, and if I did, it will still be money that was stolen from us, so it belongs to us.
@@ElParacletoPodcast No money was stolen from you. Today young workers are being taxed so you get a check each month. That is how all government welfare programs. BTW please do not use naughty words.
Zero for me all my retirement is in a roth
I think this could have benefitted from a 4th simple example. For a retired married couple filing jointly with gross taxable income in excess of $44,000, they can ignore the complexity here - 85% of their entire social security benefit is subject to income tax.
No. Say your taxable income is 44,000 and your SS is 40,000 (married couple). Your provisional income is 64,000 (using 1/2 of SS).
The taxable SS will be 6,000 (1/2 of 32k-44k) + 17,000 (85% of 20,0000, which was 64,000-44,000). Of the 40,000 SS, 'only' 23,000 is taxable. Total taxable income is 44,000 + 23,000 = 67,000. Of course, as either income goes up from there more of the SS income gets taxed at 85%. Hope this helps.
iRA is not taxable jt was already taxed
Not sure what you mean. Traditional Ira distributions have not been taxed. And Roth distributions do not count towards provisional income or any taxes for that matter.
There are several possibilities on IRAs - pre tax, post tax, earnings on each ... post tax $ ROTH are not taxable when drawn after 59.5 ... neither original or earnings.
I think $75K social security would be way above the maximum benefit you can even get right? So not a great example.
2022 max at age 70 is $4,194. If they qualify based on their own work histories, a married couple can each receive the maximum individual retirement benefit so 2x that monthly.
Why ? Already was a tax . For crying out loud what else do you want ???
They taxed the money before you put into the social security system and now they want to tax it again when you take it out.
You are getting a Federal welfare check. Stop complaining!
No matter what you name it and how you calculate it, it is still government extortion !!
You are getting a Federal welfare check. Stop complaining.
This is the most confusing video I've ever seen in my life.
Social Security taxation is certainly confusing. Can I ask what part was most confusing to you?
...this and most others (fact)
most people want to know HOW MUCH TAXES WILL BE TAKEN OUT !! a simple answer one would hope.
example : the amount is 1500 for the rest of their lives, how much taxes will be taken out 0f the 1500?
i know it varies from state to state, sheesh.........pick a state and how much will they take from the 1500
@@iamjedi06 12 states tax Social Security : Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont and West Virginia. By default there's no withholding by the feds on your monthly benefit check, but you can file a W-4V form and you can do 7, 10 or 12 or 15 (?) you need done. They won't withhold for your state if you're in that set of states. There isn't a simple answer.
@@lylestavast7652 NY taxes SS
First of all, SS is NOT a benefit. It’s a retirement fund you and your employers paid into during your working career. Now, how many people have you heard of that pass away after a few years? What happens to their money? It goes back into the system. Taxing SS should be banned, and survivors should be paid the funds that one has left behind as a result of an early death.
Don't get touchy about "entitlements" and "benefits". They are used properly SS is not a savings account. It is insurance. You don't get your premiums back if your house doesn't burn down.