How to Avoid Paying 85% Tax on Social Security

How to Avoid Paying 85% Tax on Social Security

 

Baby Boomers (those born between 1946 and 1964) have found out some hard lessons recently about how easily their retirement money can disappear.  One thing they may not have counted on is how much they may be taxed on Social Security benefits.

According to the Social Security Administration Website, the guidelines for paying taxes on social security include:

  • file a federal tax return as an “individual” 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.
  • file a joint return, and you and your spouse have a combined income* that 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.

Many adults receive social security as their only form of income. If that is the case, there income level would be low enough that they would not have to pay taxes or even file a tax form.  See topic 423.

For individuals who are lucky enough to have saved a few bucks for retirement, check out the following articles for help to avoid having to pay this high percentage:

  1. When Uncle Sam Wants His Money Back
  2. Avoiding the Social Security Tax Trap
  3. History of Taxation of Social Security
  4. AARP: Social Security and Taxes
  5. How Much Social Security Benefit May Be Taxed

Related Articles:

Coexisting with Four Generations in the Modern Workplace

The modern workplace has seen growth in the 16 to 24-year olds and over 55 year olds.  With people living and working longer, this growth has led to four generations of workers trying to coexist. This may present challenges to management.  According to The East Valley Tribune, “It’s not merely age that differentiates these workers, said AARP officials, but rather how they approach accomplishing different assignments and tasks, as well as how much “work” defines their everyday lives.” 

These 4 generations include:

World War II Generation (aka depression babies) – Those born prior to 1945

Baby Boomers – Those born 1946 to 1964

Generation X – Those born 1965 to 1982

Generation Y (aka the Millennials) – Those born after 1982

According to the Tribune each of these groups has unique needs:

World War II Generation – appreciate a logical approach to work, with clear job expectations that are fair and consistent. This group prefers face-to-face communication rather than phone or email. . .are reluctant to buck the system, uncomfortable with conflict and reticent when they disagree with their boss or fellow co-workers.

Baby Boomers – represent the largest segment of the American work force. There are roughly 77 million Boomers who are service-oriented, appreciate a team perspective, and are motivated workers . . . appreciate personal communication and the telephone, are not necessarily “budget-minded” and are uncomfortable with conflict. In addition, some may put “success ahead of result.” They also insist on phased retirement and health and wellness programs to foster a healthy lifestyle.

Generation X – are independent and creative souls who are adaptable, technology-literate and like to buck the system. They don’t need a boss constantly looking over their shoulder as they enjoy being turned loose to meet deadlines. . .this group enjoys communicating by voicemail and email and is looking for development opportunities and to add certifications to their resumes for upward mobility.

Generation Y – brings to the workplace optimism, a can-do spirit and the ability to multitask, but they are often inexperienced and require supervision and structure. This group, which prefers instant messaging, blogs, text messages and email, has difficulty communicating in the workplace and likes to be spoken with one-on-one.”