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Do You Have to Pay Taxes on Social Security Benefits?

It used to be so simple: Social Security benefits were tax-free. Period. But then, as part of a "Save Social Security" plan, Congress decided to tax up to 50% of benefits. Later, lawmakers decided to tax up to 85%, with the extra revenue going to shore up Medicare.
So, who gets taxed and who doesn’t?

First the good news: About 70% of all beneficiaries are still safe.

You’re among the 18 million or so who aren’t so lucky, though, if your “provisional income” is more than $25,000 on a single return or $32,000 on a joint return. Provisional income is adjusted gross income (not including Social Security) plus 50% of your benefits plus any tax-free interest from municipal bonds.

If that income is between $25,000 and $34,00 on a single return or between $32,000 and $44,000 on a joint return, up to 50% of your benefits can be taxed. The rest is tax-free.

Now, if your provisional income is more than $34,000 on a single return or $44,000 on a joint return, it’s likely that 85% of your benefits will be taxed.

Finally, don’t assume that your state taxes the same amount of benefits as Uncle Sam. In most states, Social Security is still completely tax-free. Take a look at our state-by-state guide to taxes on retirees to learn more about how you will be taxed during retirement based on where you live.

If you are collecting social security and have any further questions on how much is taxed or tax-free, feel free to contact our office at 440-926-9300."

Written By Kevin McCormally
Featured in The Kiplinger 

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