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Financial Planning Tips

Test Your Knowledge of Social Security Benefits
(Updated: 11/07/2017)

Social security can provide benefits for you, your spouse, and other eligible members of your family.

True or false?
Social security benefits are always exempt from federal income taxes.


Answer: False.

About 40 percent of people who receive social security pay federal income taxes on their benefits. To determine whether you will owe taxes on your benefits, you must first calculate your combined income, which is:

   Your adjusted gross income
+ Nontaxable interest
+ ½ of your social security benefits
= Your combined income

Once you have calculated your combined income, the tax you owe depends on your filing status.

  • If you file an individual return and your combined income is:
    • Between $25,000 and $34,000: You may have to pay income tax on up to 50 percent of your benefits.
    • More than $34,000: Up to 85 percent of your benefits may be taxable.
  • If you file a joint return, and you and your spouse’s combined income is:
    • Between $32,000 and $44,000: You may have to pay income tax on up to 50 percent of your benefits.
    • More than $44,000: Up to 85 percent of your benefits may be taxable.
  • If you are married and file a separate tax return, you probably will have to pay taxes on your benefits.

If you anticipate owing taxes on your social security benefits, you can ask the Social Security Administration to withhold federal taxes from the benefits you receive each month. You can withhold 7, 10, 15, or 25 percent of your monthly benefit. Only these percentages can be withheld; flat dollar amounts are not accepted. You can also make quarterly estimated payments.

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

 

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Fact vs. Fiction

We understand that it can be tricky navigating the world of personal finance. Everyone seems to have an opinion, and it can be hard to know what to believe. We created this series as a way to present and debunk some of the most common financial myths.



Fiction: If your device is infected with ransomware, you can search online for a free tool to decrypt your files.

Fact: The chances of finding an effective tool are extremely slim. Even if a solution to a previous type of ransomware is available, attackers learn from their mistakes and have likely used a more advanced form of the scheme on you.


View the Fact vs. Fiction Archive

Last Updated: 11/7/2017




 





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