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The other side of this proposed bill is elimination of the earnings cap on SS taxes. The cap would increase gradually from the current $168,600 until all earnings are subject to SS taxation.
Right, it seems like elimination of FICA taxation cap is the main goal of that bill, while not taxing soc security is the advertising point added to make FICA tax on the entire higher income (while not getting proportionally higher soc security benefits) more attractive to the majority of voters. If elimination of FICA taxable income cap would really bring in significantly more money to the IRS than taxation of soc security, then this bill actually might have some chance of passing. But still, as you noted, the main aim of this bill is actually elimination of FICA cap.
Right, it seems like elimination of FICA taxation cap is the main goal of that bill, while not taxing soc security is the advertising point added to make FICA tax on the entire higher income (while not getting proportionally higher soc security benefits) more attractive to the majority of voters. If elimination of FICA taxable income cap would really bring in significantly more money to the IRS than taxation of soc security, then this bill actually might have some chance of passing. But still, as you noted, the main aim of this bill is actually elimination of FICA cap.
You’d think they would compromise tax up to a $million in income and cut the tax on benefits or at least raise the amount before tax kicks in.
I'm going to ask a related question here instead of starting a new thread if that is okay. I hope it's safe putting dollar numbers on here, but they are only approximations.
I had approx 36k in social security benefits paid to me in 2023 (after medicare part B premiums were deducted) and had $2300 federal taxes voluntarily withdrawn. I also had a 2023 IRA payment of $12k with $2400 federal taxes voluntarily withdrawn. When I did my taxes last night, the tax software (TaxAct) calculated that I owed no taxes and I'm getting those taxes refunded for a total of $4700. Is this correct? I tried googling but most of the hits I got were companies that wanted me to use them to do my taxes. I am 68. The software used the standard deduction amount of $15,700 because my itemized deductions were not more than that amount.
Why don't I own any taxes on my SS and IRA for 2023? Am I under a specified income limit? If so, is there a table that shows this similar to this table that the IRS publishes? TIA!
Have you looked at the 1040 form AND the SS Benefit worksheet in TaxAct ?
One issue you may be missing is how SS benefits are taxed. It's not $ for $. It is a % from 0% to 85% that counts depending on other income. It would appear the SS taxable amount is reduced to 3K, added to the 12 K RMD = less than the Std Deduction= no tax owed.
BTW, you should enter the "gross" SS benefit , not after the Part B deduction.
FWIW, some of us have to "return" a portion of our SS benefits because of the SS Benefit Worksheet. :-(
I'm going to ask a related question here instead of starting a new thread if that is okay. I hope it's safe putting dollar numbers on here, but they are only approximations.
I had approx 36k in social security benefits paid to me in 2023 (after medicare part B premiums were deducted) and had $2300 federal taxes voluntarily withdrawn. I also had a 2023 IRA payment of $12k with $2400 federal taxes voluntarily withdrawn. When I did my taxes last night, the tax software (TaxAct) calculated that I owed no taxes and I'm getting those taxes refunded for a total of $4700. Is this correct? I tried googling but most of the hits I got were companies that wanted me to use them to do my taxes. I am 68. The software used the standard deduction amount of $15,700 because my itemized deductions were not more than that amount.
Why don't I own any taxes on my SS and IRA for 2023? Am I under a specified income limit? If so, is there a table that shows this similar to this table that the IRS publishes? TIA!
You may have to dig to find a form for Line 6 of your 1040 form. There is a complicated formula to see if 50% or 85% of your Social Security benefit is subject to tax. It has nothing to do with the standard deduction. Mostly it has to do with how much income you have outside of Social Security.
IIRC for a single you start to pay tax at 25k.
In the tax form you enter the gross of Social Security then in another line the Medicare premiums.
I ran the numbers thru Turbotax too and got the same results that I did with TaxAct. I just signed back into TaxAct and don't see the SS Benefit Worksheet. Are you familiar with TaxAct to know where that would be?
I looked at and printed the 1040 and I did use the gross SS benefit amount, approx $41k in box 6a (Social security benefits) and TaxAct placed an amount of slightly less than $3700 in box 6b (Taxable amount). That approx $3700 amount plus the $12,000 IRA makes my Adjusted Gross Income amount slightly less than the Standard Deduction of $15,700 so box 15, taxable income, is zero and no tax was requried.
I guess I was surprised that I didn't have to pay taxes on the entire amount of the social security benefit. This is the first year I didn't work and have a W2 and the first year I had SS benefits for the entire year so I didn't notice this on my 2022 return.
So my question is why was my taxable amount reduced from ~$41k to ~$3700?
You may have to dig to find a form for Line 6 of your 1040 form. There is a complicated formula to see if 50% or 85% of your Social Security benefit is subject to tax. It has nothing to do with the standard deduction. Mostly it has to do with how much income you have outside of Social Security.
IIRC for a single you start to pay tax at 25k.
In the tax form you enter the gross of Social Security then in another line the Medicare premiums.
Thanks GWoodle! I entered both the Medicare Part B premiums and the Benefits for 2023 from my SSA-1099 into TaxAct. My 1040 does not show the Part B premium, it only shows the Social security benefits amount. So like I wrote in my previous report to reed303, Box 6a shows ~$41,000 while Box 6b shows ~$3700.
I was under the impression that I would have to pay federal tax on the entire amount of my social security benefits and am asking here just to see if you all think I made a mistake in filling out TaxAct. I've used TaxAct for probably 20 years and this is the first year that I don't understand the return since this is the first year I had no W2 earnings. This tax year 2023 I only had SS benefits reported to me on form SSA-1099 and an IRA amount reported to me on a 1099-R form.
I ran the numbers thru Turbotax too and got the same results that I did with TaxAct. I just signed back into TaxAct and don't see the SS Benefit Worksheet. Are you familiar with TaxAct to know where that would be?
I looked at and printed the 1040 and I did use the gross SS benefit amount, approx $41k in box 6a (Social security benefits) and TaxAct placed an amount of slightly less than $3700 in box 6b (Taxable amount). That approx $3700 amount plus the $12,000 IRA makes my Adjusted Gross Income amount slightly less than the Standard Deduction of $15,700 so box 15, taxable income, is zero and no tax was requried.
I guess I was surprised that I didn't have to pay taxes on the entire amount of the social security benefit. This is the first year I didn't work and have a W2 and the first year I had SS benefits for the entire year so I didn't notice this on my 2022 return.
So my question is why was my taxable amount reduced from ~$41k to ~$3700?
Look at page 32 of the 1040 Instructions, and print a copy of the worksheet. Then fill in your numbers and you'll see how the $3700 was arrived at.. IOW the $41K is your gross amount, not your taxable amount.
Basically the portion/percent of your benefit that becomes taxable on Line 6B varies based on your other income, and the deductions that are part of the worksheet.
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