Are Social Security Benefits Taxable?
The following is a simple estate planning question asked by individuals from all walks of life: Dear Harry: About two years ago, I started to get SSI from Social Security. I was told that it was not taxable on my 1040.
Now I’m 66 and I’ve just started to collect my “regular” SS. I’m getting all kinds of advice on whether it’s taxable.
My wife is still working and won’t retire for five more years. We also have small income from investments and bank CDs.
Can you give me the real McCoy on this?
What Harry Says: Most of coursely. First, we have to determine your provisional income. This is calculated by filling out the worksheet in your instruction booklet. It is your total income plus half your SS plus tax-free income. If that exceeds the exemption base of $32,000 ($25,000 if single), some of your SS will be taxed. The taxable amount is half of the excess of your provisional income over the base.
There are a few more twists, but this is the raw meat and straight whiskey of it. That work sheet leads you through the calculations in a pretty straightforward way, but it takes time. I might add that this presents a big problem for many seniors and should be simplified.
Incidentally, SSI is exempt from income tax, but survivor benefits and disability benefits are taxable in the same way as retirement benefits.
Reference: Harry Gross, Philadelphia Daily News (August 6, 2014)
Filed Under: Estate Planning; Social Security Benefits
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