Income Tax Question

[windjammer]

I will be retiring soon. I was reading an article in the paper about income tax.

The way I read it, a couple filing jointly, could make 85% of what they get from Social Security and not have to pay any income tax.

So a couple making $40,000 on Social Security could make an extra $34,000 without having to pay any income tax.

I'm sure there are CPA's on the forum. If not, does anyone else know if this is correct?

 

[s&wchad]

Originally posted by windjammer:
The way I read it, a couple filing jointly, could make 85% of what they get from Social Security and not have to pay any income tax.

Now that's funny!

 

[feralmerril]

I always thought it was 50 percent? I been loafing! I thought anything over 50 percent you lost a dollar of soc. sec for every dolar over that! I dont get near $20,000 a year. (about $1,400 a month), wife is too young and doesnt work. We could get by nicely on 40K without worrying about extra work. (we have a rental and I get a small retirement to pick up the slack and owe nobody.)

 

[diamonback68]

My wife works and we are both on SS.
I think you can make up to about $17,500.
But also be aware if your total income with social security and work is over $32,500, you may have to declare the overage and show that as social security income and pay tax on it. It's all explained in your 2008 tax form.

 

[smith revolver cop]

It's all explained in your 2008 tax form.

+1 on this advice. Go right to the source!!! There's absolutely no way, based on your scenario, that a couple could have $74,000 in income ($40,000 social security and $34,000 additional earned income) and "pay no income taxes." You might also check with the Social Security Administration (prefably through a pamphlet online- I'd hate for you to have to go in and talk to someone! That's like sending you to the BMV with a question!). I always though that, based on your social security income, you could only earn so much without reducing your social security benefits- that is, if you earn over a certain amount, then your actual social security payments are reduced. I would make sure I checked on that. As for $34,000 a year in earned income, plan on paying taxes on that just like anybody else would for a $34,000 income... getting social security benefits doesn't shelter other income from taxes!

 

[Bullet Bob]

Okay, two issues.
1. How much can you earn without it affecting your Social Security benefits that you receive each month:

Before your Full Retirement Age year (66 for most of us), $1.00 of your benefits are withheld for every $2.00 you earn over the Annual Earnings test limit, which changes every year. For 2009, it's $14,160.00. So, let's say you are age 63 and drawing SSA benefits this year - if you earn $15,160.00, $500.00 is withheld from your benefits. There is a monthly test for people who retire later in the year. As always, contact the experts with any questions.

2. Social Security benefits as taxable income. Your SSA benefits are taxed if your reportable income on your 1040 is over a)$25,000.00 if filing as an individual, and b)$32,000.00 if filing jointly. The amount of the tax on the SSA benefits varies with the amount of the reportable income over the $25000 and $32000 thresholds.

I know people would rather ask questions on an internet forum than go to the horse's mouth, and I've made my peace with that.

For the few who don't mind doing some research for themselves, these are good sites:

socialsecurity.gov

irs.gov

You can even file for your retirement benefits online, and not have to deal with those nasty, lazy, evil, government workers.

 

[Wickahoney]

The only up side is your VA Disabilty is not considered "income" and doesn't have to be reported or added into the numbers.

The rules are also slightly different if you are on SSA Disability instead of regular retirement.

THe soc site mentioned has it all and is a LOT easier than going to/or talking to anybody a SSA.

RWT