Ask a goalgami Expert:Answer

Have a financial question?SUBMIT>



Question:


“How are Social Security payments taxed?”
-SoxFan


Answer:


The feds must be eager to ensure that our mental acuity stays honed in our golden years, for they have come up with a fairly complex formula for calculating tax liability on Social Security benefits. The first step is figuring what the Social Security Administration calls “combined income.” That’s adjusted gross income plus nontaxable interest income plus half of your Social Security benefits for the relevant year.
 
If your combined income is less than $25,000 for individuals or $32,000 for married couples, your benefits are tax free. Between those levels and either $34,000 for individuals or $44,000 for married couples, then half of your benefits are taxable. If your combined income exceeds the relevant threshold, then 85 percent of benefits are taxable.
 
The Internal Revenue Service may not be the only tax authority that wants a piece of your benefits. Several states also partially tax them, although big, high-tax states like California, New York, New Jersey, Ohio and Pennsylvania fully exclude benefits from tax.
 
For further information, have a look at the Social Security Administration website, http://www.ssa.gov/planners/taxes.htm

-Conrad de Aenlle



< BACK