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Benjamin Franklin once said, “The only things that are sure in life are death and taxes.” Truer words have never been spoken. Every April, TV commercials and all kinds of advertisements are dominated by the likes of H&R Block, Turbotax and an entire slew of companies offering their tax preparation services. This time of year can strike panic in even the most seasoned tax professionals. One commonly asked question among social security benefit recipients is, “are social security benefits taxable?”
Most of the time recipients are in the clear and will not have to pay taxes on their social security benefits. However, there are a few exceptions. The most common reason for having to pay taxes on social security benefits is if you have another source of income in addition to your benefit payments.
This can include working a job, being self-employed, interests on investments or any other income you are required to report to the IRS.
The way you file for taxes will affect how much you have to pay in taxes, but according to the IRS’s rules no one will have to pay federal income tax on more than 85% of their social security benefits.
If you file as an individual and your total income is between $25,000 and $34,000 you could have to pay income taxes on up to 50% of your benefits. If your total income is greater than $34,000 you can be taxed on 85% of your benefits.
When filing jointly you can have a total income of $32,000 to $44,000 and pay taxes on 50% your benefits. Any person with an income greater than $44,000 can pay taxes on 85% of their benefits.
Knowing how to balance your benefits and taxes can be a difficult task. Using a lawyer who knows the ins and outs of social security benefits, like Jan Dils Attorneys at Law, can help you prepare for tax time.
Jan Dils, Attorneys at Law