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Social Security benefits used to be non-taxable. There is some logic behind this, since FICA taxes are paid with after-income-tax money just as in the case of a Roth IRA. I will be surprised it this makes it through Congress, but it would certainly be a pleasant surprise.
Quick look at the proposal reveals that it increases FICA-taxable income from $168k or so to $250k. That is the essence of the proposal. The tradeoff would be abolishing federal taxation of soc security. But this is in essence a proposal for increased taxation of earned income of middle-income workers.
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.
No, I think it raises cap with a steep step-up from $168,600 to $250,000 next year, after which the cap continues getting slightly adjusted annually as it had been adjusted every year so far. It hits people who make between $168.6k and $250k per year.
PS- ha, it seems I already commented on this (earlier in the thread) some time ago :-). I completely forgot this thread and conversation. When I commented on this before, seems that I agreed the goal was elimination of cap on FICA-taxable income... maybe the news article was amended in the meantime? Because the currently posted article does not talk about eliminating the cap gradually, but raising it steeply one time (after which it continues rising only slightly with inflation).
I would be surprised if the US Congress elimilnates taxes on Social Security at a time when it is going insolvent, a flood of Baby Boomers are signing up each year, and the national debt is soaring.
Eliminating federal Social Security taxes makes no sense at all from a national financial viewpoint.
Other than that, it would be the first time in life that I got a financial break and that just never happens for me. So I can't see it.
All retirees wish it happens but it won't. There is just no way. Only for the poor and it is unlikely they pay federal taxes anyway.
They are waving elimination of soc security tax as an incentive to allow implementation of much higher tax collections from incomes of people who make between $168k and $250k (and from the employers of such people, who pay the employer half of FICA taxes). Seems like a drastic tax increase measure actually.
I would be surprised if the US Congress elimilnates taxes on Social Security at a time when it is going insolvent, a flood of Baby Boomers are signing up each year, and the national debt is soaring.
Eliminating federal Social Security taxes makes no sense at all from a national financial viewpoint.
Other than that, it would be the first time in life that I got a financial break and that just never happens for me. So I can't see it.
All retirees wish it happens but it won't. There is just no way. Only for the poor and it is unlikely they pay federal taxes anyway.
Agreed. It really makes no sense. We (the general public) want more and more handed to us, more and more benefits, but where is all that supposed to come from? Who pays for it all if not for taxes?
1040 instructions has the SS benefits worksheet as mentioned above. It appears to separate your taxed contribution from your employer's untaxed contribution in line two where your total benefit is multiplied by 0.5. It then takes further steps to determine your taxable SS from there by looking at other particular sources of income from your Form 1040.
1040 instructions has the SS benefits worksheet as mentioned above. It appears to separate your taxed contribution from your employer's untaxed contribution in line two where your total benefit is multiplied by 0.5. It then takes further steps to determine your taxable SS from there by looking at other particular sources of income from your Form 1040.
The worksheet line 2 has nothing to do with either the worker's or the employer's contribution (aka payroll tax). It merely reduces the amount of the taxpayer's SS gross benefits, in order to reduce the amount of eventual income tax on those benefit payments shown on their SSA-1099
FWIW, I generally "return" about $3000 to SSA due to the action of this worksheet on my SS benefits and other income.
... We (the general public) want more and more handed to us, more and more benefits, but where is all that supposed to come from? Who pays for it all if not for taxes?
Leave it to the Congress to make this more complicated than it needs to be.
From $0 to $25k in Total Income pay no tax on SS benefit
From $25k to $34k have 50% of benefit subject to tax
From $34k+ have 85% of benefit subject to tax
For married go $0 to $32k with no tax
then from $32k to $44k at 50%
then over $44k at 85%
The problem is more & more Americans are in one of these brackets. So they pay the tax.
Any thread with the words "social security" is automatically good for 200 posts.
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