Social Security and Taxes 

85 years ago, yes you read that correctly, it's been 85 years since The Social Security Act was signed into law. I wasn't even a thought at that time and my parents weren't either. Nevertheless, before I start babbling, we are all here to discuss the fun world of Social Security and Taxes! Now I know most of you already exited the page and have moved on with your day but the ones who are still reading, you're in for a treat.

One of the biggest changes to the program itself was in 1983 when Ronald Regan announced that Social Security Income was now going to be federally taxed. Yes, even to this day your own Social Security income may be taxed. Now, this taxation does not apply to everyone. A formula is used to determine if your income is eligible to be taxed. Based on combined income as well as provisional income. Now before I lose everyone and my mom receives a hundred calls about this. I will explain further. "If your combined income equals 100% of your adjusted gross income (AGI) plus 50% of Social Security income plus 100% of tax-exempt interest "  If your combined income exceeds specific threshold amounts, a portion (maximum 85%) of their Social Security income will be taxed. The thresholds change if you are a single or joint filer. In addition to the federal taxation, thirteen states also tax Social Security benefits. 

Naturally, most of you including me are a little confused. This is only natural, Social Security taxation is not an easy thing to grasp. Many in the industry call it, 'Confusing' or that it can 'Creep up on you'. This is something experts refer to as a 'Stealth Tax', due to the fact many people are unaware of it. More retirees now understand the value of maximizing their Social Security benefits waiting until age 70 for collection. With the income being increased so fast, this can trigger higher taxes than anticipated. Next thing you know, you are unprepared for these taxes because you did not see it coming. We encourage all of our clients to plan for this so the tax does not creep up on you. Make sure to always check with your tax professional first. 

I think you'll agree with me when I say the world of Social Security and Taxes is an ever-changing realm. One that is confusing but with the right help from experts is very easy to navigate. Of course, the decision of when to start collecting benefits depends on many outside factors like life expectancy or if you're married. No matter what the factors are and what is going on in your life. No matter what the factors are and what is going on in your life, we at Horne Insurance Agency are here to help in any way we can and will refer you to an expert immediately.