Fixed Social Security Tax Thresholds Hit Retirees Above $25,000, Catching Millions as Incomes Rise
Updated
Updated · The Motley Fool · Jul 6
Fixed Social Security Tax Thresholds Hit Retirees Above $25,000, Catching Millions as Incomes Rise
3 articles · Updated · The Motley Fool · Jul 6
Summary
$25,000 for single filers and $32,000 for married couples still trigger taxes on Social Security benefits, a rule that surprises many retirees because those thresholds never rise with inflation.
Single filers with provisional income of $25,000 to $34,000 and couples at $32,000 to $44,000 can owe tax on up to 50% of benefits; above those levels, up to 85% becomes taxable.
Fewer than 10% of retirees paid federal tax on benefits when the rules were enacted in the 1980s and 1990s, but about half do now as COLAs, wage growth and withdrawals push incomes higher.
That means even a modest COLA or larger 401(k) withdrawal can create an unexpected IRS bill, while Roth IRA and Roth 401(k) distributions do not count toward the provisional-income limits.