Social Security Benefits for Which You Will Have to Pay Tax
The rule of thumb is you are not supposed to pay taxes if your income comes mainly from Social Security. But if you are earning from some other investments or added incomes it becomes proper for you to pay the corresponding tax vis a vis the total amount of your earnings.
Some basic measures are used for tax computations, if you are an individual with a combined income between $25,000 and $34,000 then 50% of your social security benefits are subject to income tax. If you are married and will file your combined income that exceeds $34,000 your social security benefits are subject to an income tax rate of 85%.
Combined substantial income usually consist of wages earned, self-employment income, interest rates from some properties and other taxable earnings plus 50% of your retirement benefits.
Married couples are being discouraged to file their income tax separately thus their taxes are subject to an 85% rate starting at a $0 regardless of all their other incomes. It becomes ideal then for couples to file joint accounts and save on tax payments.
Such base amount rate has been set for years now and even if it might give Social Security some difficulties in keeping up with inflation rates it might not be amended yet anytime soon. It's good to note that a great number of individuals from the Baby Boom generation will be retiring in the near future. A considerable amount in taxes will definitely be collected and make up for whatever losses the past years may have incurred.
Armed with this knowledge that our retirement benefits may be staved off, it might be wise to consult tax experts early on to plan things properly. There are many venues and resources for us to get more information about how we could plan out our tax dues. With proper know how and tax management we may still be able to fully enjoy our retirement to its full potential.
Source:
http://taxes.about.com/od/income/qt/Social_Security.htm
http://www.irs.gov/businesses/small/international/article/0,,id=104936,00.html
Published by Clora Lloyd
I am a mother of two children, a housewife and a part time writer. View profile
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