This will be rather general.
Am I missing something? I want to know the rate at which my benefits will be taxed. I see plenty of sites saying what percentage of my rates will be taxed, but not the former. For the sake of argument, let’s say my monthly benefit is 3,000 (I am no where near that, btw) and it is determined that 100% of that is taxable. Where do I find the rate, so that I know how much I will receive after taxes.
I believe the tax rate for Social Security is the same as the tax rate for other normal income. So it will depend on how much income you make in total. Looks like most (all?) states don’t tax SS income, so it’ll just be the federal rate.
Here are the Federal Tax brackets
Whatever portion is taxable just gets lumped in with your other ordinary income (if any) and gets taxed at the same rate, the same rate as if it was wages.
Okay, that gives me a ballpark idea. Guess I won’t be retiring any time soon…
Thanks all.
Worst case is that 80% is taxable unless the rules have recently changed.
Thanks for the info.
If you want a ballpark estimate, fill out the IRS Form 703 worksheet using whatever you think your social security payment is going to be, and then do a dummy 1040 using whatever you think all your retirement income sources are going to be. That’s what I did to estimate how much withholding I need for my future IRA RMDs.
What the others said: if your income is only SS, then it’s easy to figure: check your SS benefit level. If you have other sources of income, that bumps you up the tax brackets and gets just as complex as whatever anyone else’s tax situation is.
What’s different in retirement is that some of your sources of income may already have tax levied and won’t be taxed again. After-tax money you stuck in a stock fund? Only the profits will be taxed, the rest has already been taxed. PRE-tax money in a 401k? Both the capital and the profits haven’t been taxed yet, so all of it will be taxed when you withdraw it.
TL;DR: it’s complex.
If you have income over the limit then It is 85%. In the example of a $3000 a month benifit or $36,000 a year. $30,600 would be taxable income and added the adjusted income. If l the tax payer is in the 20% bracket the tax would be .$6120 additional taxes. But if there was no other taxable income then the SS payment would not be taxed.
Exactly. This is what I do. The thing is, if you have enough options, you can mix getting money from post-tax investments and your 401K to stay in a low bracket. It is even easier now since they have delayed the time when you have to take withdrawals, which gives you more flexibility to just take out what you need. And you can put your withdrawal in a Roth if you desire to.
But every case is different.
ETA: The higher standard deduction from the new tax law is useful, since retired people are more likely to have fewer deductions and thus get more benefit from it.