What Percent of Social Security Benefits Are Taxable?
Since 1984, Social Security benefits have been deemed taxable income due to the Greenspan Commission Reforms. The purpose of the reforms was to increase Social Security finances by allocating the surplus money made from the taxation of Social Security benefits to the Social Security Fund. In 1984, it was established that up to 50 percent of Social Security benefits would be subject to income tax.
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Inlcusion Rate Established
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In 1993, it was established that Social Security benefits could be taxed up to an inclusion rate of 85 percent with the additional money being given to the Medicare Trust Fund. By 2080, it is estimated that the taxes accumulated on benefits will amount to about 8 percent of the Social Security Trust Fund revenue. The actual taxation amount on Social Security benefits is broken down by different factors, including income amount and household filing status.
Excluded and Not Excluded
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For people whose only income is Social Security, they will be excluded from paying taxes and will not have to file an income tax return. According to the Internal Revenue Service, a person's benefits include monthly survivor and disability benefits. Supplemental security income payments are not included and are not taxable. Unfortunately, if a person does receive additional income outside of Social Security, which is called provisional Income, he will owe taxes on a portion of his benefits.
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No Taxation Classifications
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For married people filing a joint tax return of $32,000 or less, there is no taxation rate on their benefits. Married people filing separately and who did not live together during the tax year will also not receive a taxation rate on their benefits if they file a return of $25,000 or less. The same zero taxation rate applies for singles, head of households or qualified widows or widowers with a dependent child who file a tax return of $25,000 or less. For joint filers, if they file an income tax return for more than $32,000, they could be taxed up to 50 percent of their benefits.
Taxation Classifications
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Single filers, including head of households, widow or widowers with a dependent child could be taxed on their benefits for up to 50 percent if their income tax return is over $25,000. For joint filers, their total income plus half of their social security checks cannot exceed $44,000, or they will receive the inclusion taxation rate and could be taxed between 50 to 85 percent on their benefits. For single filers, their total income plus half of their social security checks cannot exceed $34,000 or they will also receive the inclusion taxation rate and could also be taxed between 50 to 85 percent on their benefits as well.
SSA-1099
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Every Social Security recipient receives the Form SSA-1099. This form reports to the beneficiary and to the IRS the amount of money she has received throughout the tax year. A determination in tax deduction in terms of benefits is Provisional Income. Provisional Income is the taxable income you receive outside of your Social Security income. Provisional Income includes the following: taxable income, tax-exempt interest and half of social security benefits minus most of the money from adjustments on taxes such as alimony and moving expenses, which is calculated before deductions and exemptions on your taxes. Tax-exempt interest is not taxable, but it can make your Social Security benefits more taxable.
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