Social Security is a truly wonderful program that distributes nearly 64 million benefit checks to more than 15 million retired workers. These monthly payments also benefit the survivors of deceased workers and those on long-term disability. This is a lifeline many cannot afford to lose. However, many might not realize that your Social Security benefit might be taxable.
This article by The Motley Fool has a great article that delves into the history behind the taxation of social security benefits as well as offers more information on whether or not you may be taxed. Social Security taxation, a controversial addition to the Amendments of 1983, was originally aimed to only impact upper-income households in order to avoid cutting benefits for retired workers.
The odds of future retirees’ benefits being taxed is currently at about a 50/50 chance. When the taxation of benefits was put into place, people or couples whose modified adjusted gross income exceeded $25,000 and $32,000 were subject to the tax. In 1993, the second tier of taxation was created, aimed at those whose MAGI were more than $34,000 and $44,000. However, these thresholds have never been adjusted for inflation, and therefore more and more seniors are being subjected to the taxes of Social Security benefits.
This taxation, while unpopular, is a large chunk of what is helping keep Social Security benefits afloat. Social Security is facing an imminent funds shortfall, and the Board of Trustees has anticipated the program’s $2.9 trillion in asset reserves will be depleted completely by 2035.
Read more about the taxation of Social Security benefits here. With Social Security’s wellbeing in flux, it is more important than ever to have a plan for your retirement and later years. Contact us at Rhodes Law Firm today to get started on your future.