Social Security Taxation Explained! (Taxes on Social Security Benefits)| Part 1 of 2

Updated : Oct 12, 2019 in Articles

Social Security Taxation Explained! (Taxes on Social Security Benefits)| Part 1 of 2


how’s it going everybody we have a
social security Taxation video for you guys today a very common question I get
on the channel is Mike how much money can I make
before my social security income starts to become taxed? We’re gonna address that
question here today and also we’re gonna look at some of the other things I think
you should know about when it comes to Social Security benefits and Taxation I
want you guys to think of this video as part one of a two-part series so in this
video we’re gonna cover a few of the basic rules and then in part two to this
series we’re gonna look at a detailed spreadsheet on-screen and I’m gonna show
you step-by-step how you can calculate how much of your social security income
is subject to tax but we’re gonna do that in the next video because I hope to
keep this one as short as possible whenever I produce a video on Social
Security I typically get comments in the comments section where somebody is
raging about how the government has mishandled the funds for Social Security
how it’s gonna go bankrupt by 2033 I totally get it
I totally get where you’re coming from so if at any point you want to you know
if it makes you feel better to drop those kind of comments down below in the
comment section go ahead I think the good place to start here when it comes
to Social Security benefits and taxation is to know it’s not really as much about
how much Social Security benefit income you receive for the year as it is your
total combined income from other sources that will impact the taxation of your
Social Security benefits that’s the bigger picture here it’s it’s more it’s
less about how much you receive from Social Security and more about your
other forms of income that you’re gonna reporting be reporting on your tax
return the rule of thumb here is the less income you receive from other
sources like wages retirement plans and things like that
the more likely you’ll be able to avoid taxes on your Social Security income
obviously the inverse of that is true the more income you receive from other
sources the more likely your Social Security is going to be subject to tax
the two tables I’m showing you guys on-screen talk about exactly that so for
single filers which is this top table right up here so if your income is from
zero to twenty five thousand is zero percent of your social security
benefits are taxable if your income is thirty-two thousand to forty four
thousand only 50 percent of your benefits are taxable and if you’re a
single tax filer and you have an income from other sources of greater than forty
four thousand then eighty-five percent of the amount you receive from Social
Security is subject to taxation looking at the married filing joint column now
so if you’re married if your income is from zero to thirty two thousand from
other sources zero percent is taxable thirty-two
thousand the forty four thousand fifty percent of your Social Security becomes
taxable once you’re over that forty four thousand mark if you’re married and up
then you’re eighty five percent of your benefits are gonna become taxable at
that point the one good piece of news I do have for you guys is regardless of
how high your income is even if this was a million dollars then fifteen percent
of your Social Security benefits is always gonna be tax-free so if no matter
what your income is fifteen percent of your benefits are always gonna be
tax-exempt but on the reverse side up to eighty five percent of it that means can
be taxed or subject to taxation depending on your total other sources of
income now I was helping somebody with their taxes recently and it it really
reminded me of this subject and part of the reason I want to produce a video on
this is that so they they are retired and they get about fifteen thousand year
from Social Security and they get eleven thousand a year from a pension okay and
that’s their only other sources of income so there there are other sources
of income is only about eleven thousand dollars so with the Social Security of
fifteen thousand none of it is subject to taxation because there other sources
of income is below twenty five thousand dollars and that’s essentially how it
works so together right they get they get 15 grand from Social Security and
they get their 11 grand from their pension $26,000 and income altogether
but that it’s so low that they pay zero tax and that’s how it works out for them
tax wise a really good thing to think about when it comes to Social Security
benefits and taxation is what types of income are other income impact the
taxation of your Social Security benefits believe it or not most types do
but not all types of income will will impact your
social security so the things that do impacted our wages taxable interest get
this tax exempt interest so you should try to hide all of your taxable income
through taxes and interest doesn’t matter they’re gonna see it they’re
gonna still make your Social Security benefits subject to taxation so taxes
imp interest does not help you their dividends are gonna impact it alimony
would impact it business income taxable IRA distributions only so only taxable
IRA distributions are gonna impact it only taxable pension distributions are
gonna impact it and of course notice that Roth IRA distributions and tax-free
pensions do not impact Social Security because they’re not on this list this is
huge this is so big this is why I’m I stress about one of the best investment
vehicles in my opinion is a Roth IRA because not only does the income within
a Roth IRA accumulate and grow tax-free it comes out tax-free as well and it
doesn’t impact the taxation of your social security benefits so in essence
you could be theoretically you could receive like twenty to forty thousand
dollars a year in dividends from a Roth IRA and still pay zero in tax on the
Social Security benefits you receive it’s pretty freakin amazing but that’s
all done with good planning right good planning is what it takes to get there
and if you’re able to see this video early on your life I hope you can
structure your your incoming your retirement to help you do that so what
is a social security benefit tax statement look like it looks something
like this it’s the form ssa – 1099 it’s a social security benefit statement this
is from 2016 and really the form has not changed at all from what I’ve seen even
all the way going back from 2005 it really looks exactly the same year
after year after year but what you’re gonna have is in box 3 you’re in box 1
you’re gonna have the name of the recipient so in this case it’s chip for
the cockatiel the social security number of the recipients benefits paid in total
in 2016 as 10 grand net benefits is ten thousand paid by check or deposit is
ninety nine thousand four hundred and Medicare premiums paid of six hundred so
you’re gonna see a line on them that talks about your Medicare items right
here so total additions is ten grand total
benefits paid for the year is ten grand this is basically what it looks like
if you have a high income or if you have a lot of income from other sources and
you don’t want to be hit with a huge tax bill unexpectedly and box 6 you can tell
them to withhold taxes on your Social Security and I definitely that work
where I work on a lot of tax returns for a lot of wealthy individuals I
definitely see them doing that here you don’t have to but it’s something you
can do to help you stay caught up with your taxes throughout the course of the
year so where does one report their Social Security income it’s pretty
simple it’s pretty self-explanatory but now this is a 2017 form I’ll show you
2018 in just a second because when I was putting this information together I you
know I didn’t have the 2018 forms of ready yet I couldn’t I couldn’t access
them so you guys can see here your Social Security income would be reported
right here down here in box 20 – a if you were finally in a 2007 return and a
taxable amount would be right here so obviously now things have changed though
for 2018 because of the new tax form so we have to look at that so let me pull
that up for you guys real quick so you guys can see Oh unbox 5a of 1040 page 2
so this is the first page of the 1040 right here of what the new forms look
like so you just go down the page to which it’s supposed to be a Coast
postcard so this will be on the back of the postcard line 5a is your Social
Security benefits right here and then the taxable amount would be reported
right here so very self-explanatory so with that example that we were looking
at with chipper we would have 10,000 right here because his statement showed
10,000 so for the example we just looked at 10,000 of chip for Social Security
benefits would be right here and then I think I can’t remember how much I had on
the last screen but I think at around six thousand four hundred was subject to
taxation something like that but you guys you
guys get the idea but for 2018 this is where that’s gonna show up on the forms
all right guys so this was a quick basic overview of the rules for Social
Security and how your benefits might be subject to taxation based on your filing
status your different other sources of combined income and things like that we
talked about what the tax statement for social cereal looks like we talked about
where it’s reported and we talked about what types of other income and effect
the taxation of your Social Security benefits and what types of ink
do not so the next video and the next part like I said we’re gonna go over to
step by step calculation examples of how you can determine for yourself how much
of your Social Security is subject to tax now I totally recommend using tax
software when you’re preparing your taxes and that’s gonna help you all the
calculations work out for themselves but it is good to know and this is why I’m
doing it in the next part of how it actually all calculates out so you can
see it with your own two eyes I got two very detailed examples for you guys you
guys know from watching my videos if you’ve been watching my tax videos I can
get pretty detailed so you guys can really because my goal is always to help
you I can’t help people understand how to prepare tax forms but my goal with
the channel is help people understand how taxes work and how these different
areas of of income impact your tax return and that’s what I hope to achieve
there so look for that in part two thank you so much guys for hanging out
with me here on YouTube I know it takes a lot of time out of your day to be here
but I really appreciate having you if you like the video make sure to drop a
like before you leave it really helps us out be sure to share this information
with a friend especially somebody who’s receiving Social Security and wants to
know how taxation works on all that if you’re new the money in live TV and if
you want to learn more about finances investing in taxes then I totally
recommend subscribing to our channel by hitting that red subscribe button down
below the video and also hitting that Bell icon and that’s gonna notify you
every time I upload a new video and I typically release a new video about once
per week sometimes my schedule at my day job gets way too active and I can’t meet
that schedule but typically about once per week is when I release every new
video all right guys well let me know what you think about all this stuff
these crazy rules and if you have any questions feel free to drop them in the
comment section down below I will do my best get back to you I always love
reading all of your guys comments and like I said if you want to do a rage
comment about social security going bankrupt and all that stuff feel free if
it makes you feel better all means you have that it alright guys I love you
I’ll see you in the next one peace you

24 Comments

  • Happy Sunday everybody. I've gotten a lot of questions around this topic so I finally decided it was time to produce a video around this. Thank you in advance for continuing to destroy that like button as it it really helps this information reach more and more people. The second and final part to this short series should be released next Sunday. Tax season is finally coming to a close for me. I can't wait, because i have so many requested videos to produce this year, and am considering doing some live streams as well. Have a great weekend everybody. Live Life Uncaged!

  • Video Outline and Time Stamps so you can quickly jump to any topic:

    Social security combined income – 1:14

    At what point do your social security benefits become taxable – 2:05

    What types of income can impact your social security benefits? – 4:14

    Social security benefit – statement SSA-1099 5:51

    Where do you report social security income? – 7:03

    Ways to minimize taxes on social security benefits: https://youtu.be/UeDrcTDNju8

    My Roth IRA Videos Can be found here so check them out if you want to learn more:

    How rich can a Roth IRA Make You: https://youtu.be/2nx0vHGNVmE

    Roth IRA Rules Explained: How Do Roth IRAs Work?https://youtu.be/3MzZfRrgEYg

  • I'll post the link to part 2 here once it is ready. ***Please feel free to drop or comment on what other tax questions you have in regards to social security**

  • Thanks, Mike. Your info.supports my research. Looking forward to Part II! Your videos, as I have stated before, your videos inspire your viewers to research more and to be proactive on the topics you speak on. Well done.
    PS: I hope "Quince de Abril" won't be a killer for you ๐Ÿ™‚

  • Wonderful, I did not realize that I can look forward to paying taxes on social security. Thanks for the video. It's an area of my finance that I haven't paid much attention to, and I probably should since it's all related (and I'm getting there).

  • Yes, I am one of those people who curse those who run our government for what they have done to Social Security; but I actually got sick seeing that only 15% of my Social Security is "mine to keep". However , I did watch through to the end, as I hope to be MORE PROACTIVE kin my Money Management. Thanks for all your vlogs..

  • A woman dies at age 65 before collecting one benefit check. She and her employer paid into the system for almost 50 years and she collected NOTHING. Keep in mind all the working people that die every year who were paying into the system and got nothing.
    And these governmental morons mismanaged the money and stole from the system, so that it's now going broke.

    BEAUTIFUL! And they have the audacity to call today's seniors "vultures" in an attempt to cover their ineptitude. DISGRACEFUL!

    The real reason for renaming our Social Security payments is so the government can claim that all those social security recipients are receiving entitlements thus putting them in the same category as welfare, and food stamp recipients.

    THIS IS WORTH THE FEW MINUTES IT TAKES TO READ AND DIGEST!

    F.Y.I. By changing the name of SS contributions, it gives them a means to refute this program in the future. It's free money for the government to spend under this guise.

    The Social Security check is now (or soon will be) referred to as a Federal Benefit Payment ?

    I'll be part of the one percent to forward this. I am forwarding it because it touches a nerve in me, and I hope it will in you.

    Please keep passing it on until everyone in our country has read it.

    The government is now referring to our Social Security checks as a "Federal Benefit Payment."

    This is NOT a benefit. It is OUR money , paid out of our earned income! Not only did we all contribute to Social Security but our employers did too ! It totaled 15% of our income before taxes.(This should be enough for you to forward this message, If not read on.)

    If you averaged $30K per year over your working life, that's close to $180,000 invested in Social Security.

    If you calculate the future value of your monthly investment in social security ($375/month, including both you and your employers contributions) at a meager 1% interest rate compounded monthly, after 40 years of working you'd have more than $1.3+ million dollars saved.

    This is your personal investment. Upon retirement, if you took out only 3% per year, you'd receive $39,318 per year, or $3,277 per month.

    That's almost three times more than today's average Social Security benefit of $1,230 per month, according to the Social Security Administration. (Google it โ€“ it's a fact). And your retirement fund would last more than 33 years (until you're 98 if you retire at age 65)! I can only imagine how much better most average-income people could live in retirement if our government had just invested our money in low-risk interest-earning accounts.

    Instead, the folks in Washington pulled off a bigger Ponzi scheme than Bernie Madoff ever did (or Lyndon Johnson).

    They took our money and used it elsewhere. They "forgot"(oh yes, they knew) that it was OUR money they were taking. They didn't have a referendum to ask us if we wanted to lend the money to them … and they didn't pay interest on the debt they assumed. And recently they've told us that the money won't support us for very much longer. (Isn't it funny that they NEVER say this about welfare payments?)

    But is it our fault they misused our investments? And now, to add insult to injury, they're calling it a *benefit*, as if we never worked to earn every penny of it. This is stealing!

    Just because they borrowed the money, doesn't mean that our investments were for charity!

    Let's take a stand. We have earned our right to Social Security and Medicare. Demand that our legislators bring some sense into our government.

    Find a way to keep Social Security and Medicare going for the sake of the 92% of our population who need it.

  • Thanks for the video. Keep up the good work. Why are the income tiers the same for Single & Married Filing jointly?

  • Chipper looks awfully good for a 62+ year old.

    Your single chart in 2:45 has some errors. It should be:

    Under $25k 0%
    $25k to $34k 50%
    $34k+ 85%

  • Hi mike great info!!! quick question can I claim my mom as a dependent if she receives social security she received about 11k and its her only source of income. Mind i do provide for her live with her and contribute to all her needs.

  • I know alot ladies friends, who had bad husbands for over 10yrs. They will not file for this social security. I tell them it will not affect his money, they take out for 3 things with social security. The person who working ,for his spouse, and for his child. I don't understand that they need the extra money.

  • Man I have to say it, i sing up with a tax preparation company, and the training was really bad, but thanks to your videos I became one of the best agents, thanks a lot men, I hope you make more videos about forms 1065 and K-1 schedules

  • Hi Mike, you answered my question before I asked it. Excited that Roth distributions won't affect my SS income. Yay. Just thinking ahead. ๐Ÿ™‚ Also, not sure if you've made a video on this but tips to save money on taxes on Traditional IRA distributions (at the correct age of course). For those of us who have these. I mentioned the early conversion to a ROTH, but maybe there are other strategies? Spreading it out along with your ROTH and SS so taxable income stays low, or waiting til 70 if your income is decreasing. I don't know. Just thinking how this might work later. And who knows what will change by then with the tax code right? Haha.

  • Great info Mike. I think you need to correct the numbers for the single filers on the chart shown on the clip, 2:25. It is mixed with Joint figures. Thanks.

  • WHY THE NY TAX COLLECTION are take money from my SSI pay check i received only $534 they take $217 monthly to pay child support?????????

  • If a single individual has $30,000 of external income on top of Social Security and they complete a $6000 qualified charitable distribution, does that bring them down to $24,000 of external income so that their Social Security benefits are no longer taxable? Or is the taxable Social Security determined before deductions are taken off?

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