You’ve heard this before: with one hand Uncle Sam gives, and with the other hand Uncle Sam takes away.
That applies to some Social Security benefits because with one hand Uncle Sam gives Social Security benefits and with the other hand, the hand that belongs to the IRS, some of those benefits can be taken away.
Here are some of the things you should know about Social Security and taxes. And remember always consult with a tax professional.
Social Security benefits include monthly retirement benefits, survivor and disability benefits. They can be taxed.
But if you receive supplemental security income payments — the good news is they are not taxable.
So how much of your social security retirement benefits and survivor and disability benefits are taxable? The portion of benefits that are taxable depends on the taxpayer’s income and filing status.
To determine if their benefits are taxable, taxpayers should take half of the Social Security money they collected during the year and add it to their other income. Other income includes pensions, wages, interest, dividends, and capital gains.
If they are single and that total comes to more than $25,000, then part of their Social Security benefits may be taxable.
If they are married filing jointly, they should take half of their Social Security, plus half of their spouse’s Social Security, and add that to all their combined income. If that total is more than $32,000, then part of their Social Security may be taxable.
Fifty percent of a taxpayer’s benefits may be taxable if they are:
Filing single, head of household, or qualifying widow or widower with $25,000 to $34,000 income.
Married filing separately and living apart from their spouse for all of 2020 with $25,000 to $34,000 income.
Married filing jointly with $32,000 to $44,000 income.
Up to 85% of a taxpayer’s benefits may be taxable if they are:
Filing single, head of household, or qualifying widow or widower with more than $34,000 income.
Married filing jointly with more than $44,000 income.
Married filing separately and living apart from their spouse for all of 2021 with more than $34,000 income.
Married filing separately and living with their spouse at any time during 2021.
Again, consult with a tax professional. Review the IRS instructions. But most importantly don’t think your Social Security money is automatically tax-free. But supplemental security income benefits are not taxable.
And remember tax attorney at Legal Tax Defense will give you a free consultation on tax issues. Call now to speak to a tax professional. You’ll also find more information here: www.LegalTaxDefense.com so check it out.
Disclaimer: Alan Mendelson is a well-known TV consumer news reporter who reports on tax issues. You should seek professional advice if you have tax questions or issues.