Taxes on Social Security Benefits in 2022: Calculating| Viral News!

Social Security payouts might be taxed, something many individuals don’t realize Why does the government send you money one day and then ask for it back the next?

The federal tax on Social Security is designed in such a way that many people do not pay any tax on their payments.

Most people who exclusively receive Social Security benefits are not subject to federal income tax. The average monthly Social Security payout for a retired worker in 2022 is $1,658, or $19,896 annually.

That’s significantly below the federal tax-free threshold.

If you have other taxable income, like a job, pension, or conventional IRA, Uncle Sam is more likely to seize 50% or 85% of your Social Security check.

A part of your Social Security benefits may also be taxable depending on where you live.

(SSI payments from the Social Security Administration are not taxable.)

How Social Security Taxes Are Calculated

Social Security Benefits

Once you begin earning Social Security payments, you’ll receive an annual statement (Form SSA-1099) in January detailing your benefits received the previous year.

To determine how much, if any, of the total may be taxed, first determine your “provisional income.

” Your provisional income is normally equivalent to 50% of your Social Security benefits, 50% of your tax-free interest, and 50% of your other non-Social Security things (minus certain deductions and exclusions).

If your provisional income is less than $25,000, your Social Security benefits aren’t taxed.

If you’re married and filing jointly, the limit is $32,000 Social Security benefits may be taxable up to 50% if your provisional income is between $25,000 and $34,000 for single filers and $32,000 to $44,000 for joint filers.

In the case of a single taxpayer or a married couple, up to 85% of their benefits may be taxable.

The IRS has a simple calculator to help you figure out how much of your Social Security benefits are taxable.

Once you know how much (if any) is taxable, add it to your taxable income on Line 6b of Form 1040. This revenue is taxed alongside other income in your tax rate.

Taxation of Social Security Benefits

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Include the taxable portion of a lump-sum (retroactive) payment of benefits received during the year in your taxable income for the year.

An exception to this regulation allows you to determine the taxable portion of a lump-sum payment using prior-year income.

But don’t mix together lump-sum retirement and death benefits. No element of a Social Security lump-sum death payout is taxable.

Social Security Tax Withholding and Estimated Tax Payments

Knowing that a portion of your Social Security benefits will be taxed is a solid reason to have monthly federal income taxes withheld. Fill out Form W-4V and mail it to your local Social Security office.

Instead of monthly payments, you can make quarterly estimated tax payments. To avoid an IRS underpayment penalty, make sure you have enough withheld or paid quarterly.

State Social Security Taxation

Some states, in addition to the feds, tax Social Security. State tax benefits differ in manner and extent. For example, New Mexico follows the federal government’s lead on Social Security.

However, some states only tax Social Security benefits if their income exceeds a certain level. For example, Missouri taxes Social Security only if your income is at least $85,000, or $100,000 if married filing jointly.

Utah taxes Social Security benefits but gives a tax credit for a part of them.

While state taxes cannot be withheld from Social Security income, they can be paid in advance. Consult your state’s tax agency for details on anticipated tax payment requirements.