Ask Rusty – Must I Pay Income Tax on Social Security Benefits?
Dear Rusty: I do not recall the rules on my income tax obligation for Social Security benefits. Can you please explain these rules to me? Signed: Senior Taxpayer
This recording presents the viewpoints of the AMAC Foundation’s Social Security Advisory Staff, trained and accredited under the National Social Security Advisors program of the National Social Security Association, LLC (NSSA). NSSA and the AMAC Foundation are not affiliated with or endorsed by the United States Government, the Social Security Administration, or any other state government. To request additional information, contact our Advisory Staff at 888-750-2622, or email us at SSAdvisor@AmacFoundation.org.
Greetings:
I know AMAC is lobbying Congress to fix social security and impending insolvency if nothing is done. However, I don’t ever hear anything regarding the antiquated provisional income limits that haven’t been raised for inflation since the early 80’s. The income limits, especially for those who have other ‘taxable’ income that would be added to the social security income, are very low. Why hasn’t Congress addressed that. A Congressman from FL (Posey) recently introduced a bill entitled “Senior Citizen Inflation Relief Act”. While that particular bill seems to be an important temporary solution for dealing with inflation, which would increase the amount of money an individual can EARN WHILE STILL RECEIVING Social Security benefits, I also strongly feel, as I’m sure most other American’s do who are currently drawing Social Security, that a more pressing issue needs to be addressed in Congress which has been widely ignored for years.
Although his proposal would help those who are still working and collecting social security, what is drastically needed is a change that will greatly help senior citizens on fixed incomes who are already retired and not working, which is the provisional income thresholds for both single and married taxpayers, indexed to inflation, in order to bring in line a fair amount of taxation for SS benefits for those who have other retired/investment income over those antiquated thresholds (not changed since 1983)! Because that rule hasn’t evolved for almost 40 years, seniors today are losing out on a chunk of their benefits — benefits they would otherwise need to stay afloat.
Back when those 1983 provisional income limits were put into place, incomes were much different than and the cost of living, overall, was substantially cheaper. It doesn’t take much income in today’s dollars (especially for those who have investment and other retirement income/pensions) to go over those very low thresholds and to be taxed on up to 50% and 85% of benefits.
Taxing senior citizens on social security payments is bad enough (it’s essentially a tax on a tax). However, the long overdue provisional income issue needs to be fixed immediately. I don’t understand why Congress keeps ignoring it. “Seniors have been subject to a dated set of rules, despite continuously rising living costs. But since the average monthly Social Security benefit has increased substantially since 1993, one would think that the thresholds for taxing benefits would have followed suit. For some odd reason, that just hasn’t happened. And so now, seniors are stuck losing a large part of their benefits to taxes at income levels that barely set the stage for a comfortable retirement. What adds insult to injury is the fact that the Social Security Administration is very aware of the way increasing living costs can impact retirees.”
This is why COLAs are so important, but that doesn’t address the real issue. The other elephant in the room is the upcoming insolvency of the trust fund, now expected in 2034. Congress needs to act to address this funding shortfall soonest way before the program is insolvent. “Of course, for Congress not to act to try to repair the program would be a huge abdication of responsibility. There’s not one member of Congress who should think, ‘Oh, I know the best course of action is to do nothing!”
Would love to hear a reply back to my email address, if so inclined.
Thank you.
Gary
“Your comments on taxation of Social Security benefits have been forwarded to the AMAC department which handles Social Security legislation matters, and they will respond to your inquiry via email shortly.”
Sharon L Kleczka RSSA®
AMAC Foundation