Benjamin Franklin once wrote that nothing in life is certain except death and taxes. Unfortunately, that statement reigns true today. We must pay taxes on our benefits but how much we’re taxed depends on your situation.
The Social Security Administration (SSA) breaks down the taxation rules for Social Security benefits. Social Security is only partially taxed because you’ll only pay taxes if you have significant additional income on top of your monthly benefits. Seniors can earn while retired to boost their retirement savings, so it’s common to have an income and benefits at the same time.
The SSA calculates your taxes by looking at what they call your “combined income.” Your combined income is the sum of your adjusted gross income plus half of your Social Security benefit and nontaxable interest. If after totaling those figures up, your income exceeds the limit you’ll have to pay taxes.
For single individuals with between $25,000 and $34,000 in combined income, 50 percent of your total benefit can be taxed. If your income is over $34,000 than up to 85% of your benefit can be taxed.
For married couples filing together, 50% of their benefits can be taxed if their combined income ranges between $32,000 and $44,000. If it is higher than that, then they can be taxed on up to 85 percent of their monthly benefit.
Social Security taxes are flexible too. You only pay taxes if you make a larger income. Find your retirement balance between earning an income and utilizing your benefits. Working more can increase your benefits and savings but can also increase your taxes. Alternatively, there are more ways to increase your benefits than by working. That way we can work together to add retirement to the things that are certain in life.