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As a retiree, Social Security benefits are an essential source of income for many seniors. However, it is important to understand that these benefits may be taxable, which can impact your overall tax liability. In this article, we will discuss how to calculate taxes on your Social Security benefits.
The first step is to determine your provisional income. This is the sum of your adjusted gross income (AGI), any tax-free interest income, and 50% of your Social Security benefits. If your provisional income is less than $25,000 for single filers or $32,000 for married couples filing jointly, then your Social Security benefits are not taxable.
If your provisional income falls between $25,000 and $34,000 for single filers or $32,000 and $44,000 for joint filers, then up to 50% of your Social Security benefits may be taxable. If your provisional income exceeds these amounts, up to 85% of your benefits may be taxable.
Once you have determined the proportion of your Social Security benefits that are taxable, you can calculate the actual amount of tax owed using your marginal tax rate. This is the tax rate you pay on the last dollar of income earned. For example, if you are in the 22% tax bracket, you will owe 22 cents in tax on every additional dollar of taxable income.
To illustrate how this works, let’s say that your provisional income is $40,000, and 85% of your Social Security benefits are taxable. Assuming you are in the 22% tax bracket, you would need to take $17,000 x 0.85 = $14,450 and add that amount to your AGI to determine your taxable income. If your AGI was $50,000, your taxable income would be $50,000 + $14,450 = $64,450.
Next, you would need to calculate your tax liability on this amount using the tax tables provided by the IRS or a tax calculator. In this example, your tax liability would be $9,235. However, you would not owe this entire amount because some of it would have been paid through withholding on your other income sources. As a result, your actual tax liability may be lower.
It is important to note that some states also tax Social Security benefits, so you may need to calculate your state tax liability separately.
In conclusion, calculating taxes on Social Security benefits requires a few extra steps, but it’s not that complicated. By understanding the basics of how your benefits may be taxed, you can plan your retirement income more effectively and avoid any surprises at tax time. If you have more questions or need assistance, consider consulting a tax professional.
thanks Josh, the calculations were helpful, it was a little confusing on what is considered taxable income, it seems RMD, IRA's are included in the calculations. What about military retirement income, 401Ks, 503 bs? thanks again
The only issue here is not being able to calculate how much social security will be available after the next 10 years.
what tax program are you using ? thanks
This is the first video of yours I have seen and now I am a subscriber. I love the way you broke this al down to its simplest form. Not only that but I feel confindent in y=in it. A lot of these types of videos the person does a whole lot of hem and hawing, Thank you so much.
Excellent video as always! Question please: How doe the formula's work if you have reached FRA?
the easiest way to calculate taxes on your SS… buy Turbo tax software and load in nothing but your SS… see the banner at the top of the page it says $0 … now start to add in the other income one at a time… see when you load your pension and how the banner at the top changes to $1500 …. and if you took out the correct amount for taxes put that number in there and walla… that is how much the IRS is clawing back your SS check… simple isn't it… and when you get done adding in all of the income and the taxes you paid on it then you are done with your taxes and can file…
If you're trying to gain a following, lose that hat.
Thanks!
the saddest part is that none of these rats in congress ever talk about adjust the amounts in calculating our SS!!!! lets vote for it or throw them out all these rats!!!
ok, so in the " single " example, and that Income is 50,000, which he is saying is only social security….. where on earth did this person work that they are drawing over 4,000 each month in social security ??? is he still single ??? cause I need to meet this guy !
RMD is usually how many %?
If you don’t make any more than $25,000 in Social Security you don’t have to worry about paying any taxes unless you have other outside sources of income but if all you have is Social Security and it doesn’t add up to over 25,000 you don’t even have to file taxes at the end of the year trust me I’ve been collecting now for seven years every year has been under 25K and you don’t pay a dime I don’t even file not necessary if you don’t owe anything then it makes no sense to file
I'll be paying on 85% on my SS when it comes time. It is truly an awful thing to have that much income to where this is the case. Woe is me!
I liked the first part,, thank you,
But i dont get it, at the end why does he mysteriously suddenly have no taxes?? Whats a Qualified dividend and… what? What?
Please show the information on the tax forms not a white board
Calculator: https://www.calcxml.com/calculators/how-much-of-my-social-security-benefit-may-be-taxed?skn=#top
That is what I was looking for.
how in the heck can a 70 year old couple get 6 figures . as income
7:23 – You mean 12000 'multiplied' by 0.5 and not 'divided' by 0.5.
Great stuff, i had no idea, you have made this very clear to understand, thanks
I am completely confused – why is it bad for me to earn qualified dividends!?
Thanks for this video. I have to start taking RMDs year after next, and although my SS is probably half of what the single guy in your example is, I've had to pay taxes on 85% of my SS ever since I've started taking it! Lucky for me it can't get any worse than 85%, I guess. It's a ripoff for anyone who has planned reponsibly for their retirement.
Social Security should not be taxed at all. politicians are crooks. Tax on a tax.
Good Video.
I am helping a single person that is on SS with a retirement account. I am going to calculate the maximum she can take out without any tax and either put it in a taxable investment account or into a ROTH IRA account. At RMD, the amount will be less, but my goal is to get it to zero.
It would be interesting to do this for your example.