If Your Earned Income surpasses specific Limits, the Internal Revenue Service (IRS) may Claim a Portion of Your Social Security Benefits.

If Your Earned Income surpasses specific Limits, the Internal Revenue Service (IRS) may Claim a Portion of Your Social Security Benefits.

Filing taxes might not be everyone's favorite pastime, but for many seniors, it's more than just an annual chore. Unlike most folks, they don't typically receive tax withholdings from their retirement account withdrawals. Consequently, they might find themselves owing the IRS when tax time rolls around.

This can get complicated due to various factors. Retirement account withdrawals and income from jobs aren't the only considerations. The federal government also has the power to tax up to 85% of Social Security benefits if a senior's income exceeds certain thresholds based on their marital status.

The Nitty-Gritty of Social Security Benefit Taxation

Back in the 1970s and '80s, when Social Security was facing financial difficulties, the government came up with a solution: taxing Social Security benefits. They added another tier of benefit taxes in the early '90s. Since then, these rules have remained unchanged.

The IRS calculates how much of your Social Security benefits should be taxed by considering your marital status and something called provisional income. This is your Adjusted Gross Income (AGI), plus any nontaxable interest if you own municipal bonds, plus half of your annual Social Security benefit.

Below are the current tax brackets:

| Marital Status | 0% of Benefits Taxable If Provisional Income Is Under: | Up to 50% of Benefits Taxable If Provisional Income Is Between: | Up to 85% of Benefits Taxable If Provisional Income Exceeds: || --- | --- | --- | --- || Single | $25,000 | $25,000 and $34,000 | $34,000 || Married | $32,000 | $32,000 and $44,000 | $44,000 |

Single

While this might make it sound like the IRS could take up to 85% of your benefits, it's important to note that it depends on your income tax bracket. If you're a 22% income taxpayer, for example, you'd pay tax on 22% of up to 85% of your benefits.

$25,000

Unfortunately, these taxation thresholds aren't adjusted for inflation, so as incomes and benefits rise, more and more retirees find themselves in the taxable range.

$25,000 and $34,000

What Seniors Can Do

$34,000

Talk of eliminating Social Security benefit taxes has been floating around, with President Trump expressing interest. But, as of now, there's no legislative movement on the issue. If you owe taxes this tax year, you may not be able to do much about it. You could, however, consider setting up a payment plan with the IRS.

$44,000

For future tax years, consider limiting your taxable retirement withdrawals. Keep an eye on your tax bracket and consider shifting towards Roth savings as you approach the top. These withdrawals are tax-free, which could help reduce your Social Security benefit taxes.

Married

You can also choose to have tax withholdings made on your Social Security checks. This might save you the hassle of calculating how much you might owe. Just remember, if too much is withheld, you'll get a refund when you file your tax return.

$32,000

If you're unsure of how Social Security benefit taxes might impact you or if you have to pay state taxes on your benefits (in states like Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and Kansas), consult with a tax professional. They can provide advice tailored to your situation.

$32,000 and $44,000

1. Due to the taxable nature of Social Security benefits, seniors who exceed certain income thresholds based on their marital status may find up to 85% of their benefits subject to federal taxes.
2. To calculate the amount of Social Security benefits subject to tax, the IRS considers marital status and provisional income, which is derived from Adjusted Gross Income, municipal bond interest, and half of the annual Social Security benefit.
3. Seniors who wish to minimize their Social Security benefit taxation could consider limiting taxable retirement withdrawals, shifting towards Roth savings, or having tax withholdings made on their Social Security checks.
4. It's crucial for seniors to consult with a tax professional to understand the impact of Social Security benefit taxes and whether they need to pay state taxes (in select states) on their benefits.

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