That is the age when the social security or the social security income is no longer taxed
Perchee (2006) noted that when Social Security was established it was designed to be a secondary source of income for the elderly. But over the period, Social Security is increasingly used and has become an important source of retirement income among the elderly. Consequently, it has become a matter of concern as to when or if Social Security benefits should be taxed.
At what age is the Social Security one not taxable on federal income? The sad thing is that there’s no age when all Social Security benefits are tax-free, no matter how appealing this concept might sound. Generally, whether a benefit will be taxed will depend on the total income that you earn or receive.
Self-employed individuals also have to pay FICA tax, which is how the Social Security benefits are taxed
Originally, up to 50 percent of your Social Security could be taxed and with the recent legislation, up to 85 percent of the benefits can be taxed based on the recipient’s total income. This includes:
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Your adjusted gross income is the next step in the process of obtaining your income information after filing your tax return.
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Nontaxable interest
Social security benefits whether you receive a monthly check or not are generally cut in half.
That is, if the total income is between $ 25000 and $ 34000 for an individual and between $ 32000 and $ 44000 for a married couple filing jointly then up to 50% of Social Security benefits are taxed. More than the said limits, it is possible for 85% of the benefits to be considered taxable.
Thus, part of the SS benefits that the person receives after he or she reaches age 65 or 66—full retirement age for receiving taxes on a portion of their Social Security benefits even if they are over age 65 or 66.
Exceptions
However, some recipients do not need to report federal income tax on Social Security benefits regardless of the combined income. These include:
Those persons whose adjusted gross income with nontaxable interest and half of Social Security benefits totals $25000 for single taxpayers and $32000 for married couples filing jointly. It ought to be appreciated here that all Social Security benefits are tax-free up to these thresholds.
Specifically, those who use the status of married filing separately will be required to pay taxes on benefits when the gross income reaches $25,000 and above.
SS beneficiaries who are low-income taxpayers and file only to report monthly benefits could be allowed to report without taxation. This encompasses those earning less than $25,000 a year (or $32,000 for a couple).
Strategies that can be applied to Minimize or Eliminate Taxation
For Social Security taxability, total income determines the amount of tax paid and this is quite a challenge if one does not experience significant business losses or other adjustments that could wipe out other income. However, there may be some tax planning strategies to employ, such as: However, there may be some tax planning strategies to employ, such as:
Postpone Social Security benefits as far as possible – the longer one can wait without taking Social Security benefits, the lower the checks received, which will help avoid crossing certain limits.
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Coordinate IRA and 401(k) – be wise about when, where, and why you disperse funds from your retirement accounts to avoid absurd RMDs.
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Decrease interest/dividend income – make sure some of the investment accounts are kept free from producing much taxable earnings.
- Be aware of tax seasons – including when starting or adjusting the Social Security benefits and other distributions.
Taxation Varies by State
In addition to federal taxes, thirteen states also tax Social Security benefits to some degree: Some of the states where mineral rights can be sold include Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont, and West Virginia.
Details of how these benefits are taxed are laid down rigorously in these states with much flexibility. For example in Missouri all of Social Security is excluded from taxation however, the first $3,000 of other retirement income is taxed on a reduced basis once income exceeds certain levels all of Social Security is excluded from taxation in North Dakota however, the portion of Social Security taxed phases in gradually. Thus, it can be noted that rules at the state level also have substantial influence over taxation.
The Takeaway
Regrettably, the Social Security payees cannot count on getting to a specific age where their benefits will be free of taxes. While some portions of income have minimum thresholds that must be earned before they can be taxed, it does not consider age. However, being aware and prepared for taxation possibilities may assist in positioning it to gradually decrease the share of what is taxable.
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