Withdrawing more money to cover inflation? Beware of this Social Security Risk | Personal Finance - Market News
Home » Withdrawing more money to cover inflation? Beware of this Social Security Risk | Personal Finance
Social Security

Withdrawing more money to cover inflation? Beware of this Social Security Risk | Personal Finance

Withdrawing more money to cover inflation?  Beware of this Social Security Risk |  Personal Finance

How Much Can Your Income Be Without Paying Social Security Taxes?

The big question to ask yourself when your family income rises is: When are your Social Security benefits taxed?

When it comes to federal taxes, only some income counts. The Social Security Administration looks at “provisional” income, which is half of your Social Security checks, all taxable income, and some non-taxable income. If your provisional income exceeds certain limits, here are the tax rules you will have to deal with:

  • Single taxpayers with provisional incomes between $25,000 and $34,000 are subject to tax on up to 50% of the distributions.
  • Single tax applicants with provisional income in excess of $34,000 are subject to tax on up to 85% of the distributions.
  • Married joint filers with incomes between $32,000 and $44,000 owe taxes on up to 50% of the distributions.
  • Married joint filers with incomes over $44,000 are subject to tax on up to 85% of the distributions.

The thresholds at which distributions are partially taxed are not subject to adjustment every year due to wage growth and inflation. That means that while you may need to increase your income this year to maintain purchasing power, the IRS won’t take that into account when determining whether your benefits will be taxed.