How Social Security is Taxed | Made Easy!

[@AnnaOllsson]

Increasing tax rates are the reason I rolled over my 401k to a Roth. I don’t want to be 59 paying taxes on current income on withdrawals made from my retirement account.

[@HildaBennet]

I completely agree; I have approximately $650k in external retirement funds. I am debt free and have very little money in retirement funds compared to the total value of my portfolio over the past three years. To be honest, the Fin-advisor can only be neglected, not rejected. Just do your due diligence to identify a fiduciary one.

[@FinnBraylon]

I completely agree; I have approximately $650k in external retirement funds. I am debt free and have very little money in retirement funds compared to the total value of my portfolio over the past three years. To be honest, the Fin-advisor can only be neglected, not rejected. Just do your due diligence to identify a fiduciary one.

[@bartlyAD]

This is exactly how i wish to get my finances coordinated ahead or retirement. Can I get access to your advisor?

[@FinnBraylon]

Rebecca Noblett Roberts is the manager I use. Just research the name. You'd find necessary details to set up an appointment.

[@bartlyAD]

I just googled her and I'm really impressed with her credentials; I reached out to her since I need all the assistance I can get. I just scheduled a caII.

[@dipaknadkarni62]

Thank you. My wife and I were on active duty in the US Navy. She died on active duty and is buried with full honors in Arlington National Cemetery. I retired at nearly 30 years on active duty In the Summer of 2021. I decided that I would take survivor benefit, waiting until age 70 to take mine. I would have asked her to do the same so she could be financially independent. I miss her terribly. I thank you for all of your videos.

[@tonyroo11]

Thank you for your and your wife's Service

[@puravida5683]

Why is social security even taxed! Especially, when the tax table is not even adjusted for inflation.

[@HolySchmidt]

I hear you

[@acetheking3136]

Republicans smh

[@tracy6947]

@@acetheking3136 both parties agreed unanimously to tax social security benefits

[@tracy6947]

Created Revenue

[@johngill2853]

Because you never paid tax on the part your employee contributed all them years

[@Anitasolomon-u4p]

Its worse here, our economy is like a flailing fish, fighting for its life. The normal state of the U.S. economy is actually very bad. Because of this it goes into convulsive spasms fighting to grow any way it can out of desperation. Tricks, gimmicks, rule changes try to stimulate the economy and prevent it from falling but they only bring temporary relief to people since, when you factor in inflation we are declining.

[@Davidvictor6]

People believe their currency has the worth it does because they have no other option. Even in a hyperinflationary environment, individuals must continue to use their hyperinflationary currency since they likely have minimal access to other currencies or gold/silver coins.

[@christainjames]

Inflation is gradually going to become part of us and due to that fact any money you keep in cash or in a low-interest account declines in value each year. Investing is the only way to make your money grow and unless you have an exceptionally high income, investing is the only way most people will ever have enough money to retire.

[@Pamala-p1t]

I've tried investing in the stock market several times but always got discouraged by fluctuations of stock value. I would be happy if you could advise me based on how you went about yours, as I am ready to go the passive income path.!!

[@christainjames]

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[@Pamala-p1t]

Just ran an online search on her name and came across her websiite; pretty well educated. thank you for sharing.

[@voyagerman22]

Simple straightforward example, thank you. This is the first time I’ve ever heard of choosing lowest of 3 calculations like in your example. Most content just states the income thresholds.

[@guitjammin4710]

Geoff, With the the 3 tests, do you get to choose between them and of course select the lowest outcome as in this scenario where only $16200 was subject to tax? I assume that amount is then added to AGI to determine your final tax?

[@vivianowen]

If you want to grow your wealth, you should talk to an investment adviser. I can vouch for their expertise, because I have made over a million dollars since 2021 with their help. I just bought my third rental property, thanks to Rochelle Dungca-Schreiber, my investment adviser. You can find her online and see for yourself how good she is.

[@lp6696]

I just watched the video (2 times) and at the end, it does say Choose Option 3 (6:08 mark), and in the first part of the video it does mention you do get to pick which of the 3 options is the lowest. So 16,200 is then added to your AGI and that total amount is what is taxed I assume by Federal and I am going to check my State taxes to see if that is any different. I plan to read the information in the link to the social security rules. I wonder how anyone figured out the above thresholds to put into the tax codes and how long that had taken to do (they were paid by our taxes to do this).

[@anniesshenanigans3815]

@@lp6696 very convoluted tax system!! I though going into retirement would be EASIER tax filing.. I have filed my own taxes since I was 16..

[@lp6696]

@@anniesshenanigans3815 This is strange I did not write the above comment it appears KZbin has an issue with who was the author of the comment. When I get time I will try to figure out how to report this to KZbin, I have never put a time mark in a comment before, and I am not even sure how to do that.

[@anniesshenanigans3815]

I am going to watch this several times until I can figure out that 3 option thing.. this is nuts!! I have prepared and filed my own taxes since I was 16. Even with property, deductions, etc.. nothing seems as convoluted as this!!

[@carolynnorton9552]

I got confused too. He's going backwards in his explanation: He is first stating what the combined income is, THEN starts how he did the calculation to arrive at the combined income. It looks, at first, like he is using the combined income to start the calculation. Confusing!

[@KevinWidener-k7h]

Based on the comments, there seems to be some confusion as to the 35, 50, and 85 numbers. This isn't the tax RATE, but rather the amount of income to be taxed. In the example given, if this couple is over 65, they still have their standard deduction to use. The AGI would be 52,200 and deduction is 27,700 for a taxable income of 24,500. Marginal rate is 12%. So, what started out as 40,000 in SS benefits, is reduced to 16,200 taxable, for a total tax of 1,944 on those benefits.

[@guzzi95]

Great information. They never say how much money is put into the system when someone passes away or even if it is put back into the system. Unfortunately there are quite a few people that paid into SS all of their working lives but never got to receive any payments from what they paid in because they are no longer with us. It is bad enough that we pay into our own SS throughout our working years, then when we no longer can work or just don't want to because of various reasons, we still have to pay taxes on what we paid in.

[@TheDealHunter]

Geoff - Thanks for saying, "may owe" a lot. The most valuable words in the tax code on this subject are, "may owe" and "up to". Most YT videos on this subject wrongly state that if your combined income falls in either the 50% or 85% range that your entire SS benefit is taxed at 50% or 85% which is far from the truth. Your worksheet makes this much less complicated.

[@jamesellery9238]

Thank you so much. I had never heard of the tests before and have not found a lot of info on the net concerning the tests. I have always done my own taxes and may have missed this. Fortunately for me I have not yet started collecting and will probably wait til FRA. Great channel!

[@davidwild3888]

Thanks for trying to explain this very confusing taxation. I hope my tax software encompasses it into the tax calculation.

[@marcd1981]

All I can say right now is...wow... First, thank you for trying to explain this to the average tax payer out here. This is the first time I've looked into taxes on Social Security, and all I can think of is how insane the system seems to be. Why on Earth are there so many scenarios for the average person? We all know if you have enough money, none of this is even applicable, which makes it even more frustrating. I just retired last year at 59 years old. I was planning on retiring at 62, but there were multiple circumstances that allowed me to retire even earlier, saving my sanity in the process. One of these is the fact I have a pension to draw from which takes care of my expenses every month. I still have a 401k and Social Security to start drawing from, and I'm still making decisions for those withdrawals. Geoff, even with all of the information you just supplied in this video, my situation was not covered. You stated the single amounts, and the married, filing jointly amounts, to apply the three tests to when figuring your taxes. However, I have re-married in the past couple of years, but my wife and I do not file jointly. How does this information apply in my case?

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[@RahulGuptaS880]

saw this name been mentioned on CNBC news sometime.. i think i'd give him a trail as well.

[@marcd1981]

@tokenslnvaders5640 Do not reply to these bots. This is a stock trading scam they are trying to get people to get into, not serious retirement savings or Social Security tax information.

[@southernbelle007]

Thanks so much Geoff!! Great way to start my day having my first year of claiming taxes on my SSR off of my mind!

[@tomj528]

Nicely explained! About a month ago I used my own spreadsheet version I created a few years ago to calculate our tax free Roth conversions for 2022 before the end of the year. I love that thing as I can dial in our taxes perfectly to maximize the form 8880 retirement savers credit and any surprises can be corrected with our new IRA/Roth contributions made post 2022 but before April 18th and credited as 2022 contributions. IRA contributions to lower our taxable income and increased Roth conversions to increase it. Once done with our Roth conversions it's on to stepping up the cost basis in our taxable investments just in case congress wants to change the 0% LTCG/QD rate of the 12% bracket or if we find ourselves in a higher bracket later in life. I find that in this stage of our lives (and at every stage thus far) our spending or more to the point the lack thereof drives our tax plan/lack of tax liability more than anything. Cheers!

[@Buck0seven]

You are awesome, Geoff! Thanks so much for your useful information.

[@HolySchmidt]

Thanks Buck

[@chanks9315]

If anyone's interested, I followed Geoff's calculations in Excel for my 2023 amounts as well as my estimated 2024 amounts. The excel results matched the Social Security Worksheet from H&R Block 2023 software. The 2023 values resulted in Test #1 while the 2024 values resulted in Test #3. THANKS GEOFF!!

[@robertb3214]

This is great video. Thanks for showing the three tests.

[@AlbertFraklin1970]

One should assume that all pension plans are already taxed, that would also include Social Security which for many they may need to pay quarterly due to their bank's report to the IRS.

[@jamesedwards2687]

Great explanation. Cleared up my confusion.

[@daveschmarder-1950]

I'm in the "0%" bracket for long term capital gains, and also get SS. When the calculations are done, those LTCG's aren't really tax free. They only become tax free after 85% of the SS is already taxed and before the tax bracket ceiling is reached.

[@giemt1654]

thank you for this video Geoff! love the detailed explanation and example you’ve shared, learned something today 😊

[@timjones8295]

It would help if you do an example calculating AGI first, then three-step test concluding with the net tax due. Showing this via the tax form one uses would be beneficial to all of us.

[@todddunn945]

Or you could just use the worksheet on page 32 of the 2022 instructions for form 1040. It is actually very simple and Geoff's three tests are built into it so that you don't even notice them.

[@BadPhD777]

Just went through page 32. They sure know how to make things complicated, but it works if you follow the instructions

[@todddunn945]

@@BadPhD777I put that worksheet and the cap gains and qualified dividends worksheet into my tax spreadsheet. Now all I have to do is enter income numbers in the various categories. It is handy for tax planning.

[@BadPhD777]

@@todddunn945 I've got it in my spreadsheet now too! Been comparing how much tax I would pay with and without taking SS. I live in Oregon, and they don't tax SS, so I'll save on taxes if I take SS and some IRA vs all IRA.

[@todddunn945]

@@BadPhD777 I am in Maine where SS is also not taxed by the state. Maine also gives us the Full federal standard deduction plus a $4,700 dollar personal exemption in 2023. I hold some treasury securities that are exempt from state tax. Maine also has a sizeable pension/IRA/401K/403B exemption. Overall Maine treats retirees well. Incidentally, your screen name suggests that you too are an intellectual elite. Same for the both of us.

[@BadPhD777]

@@todddunn945 I am one who does way too much pondering over the myriad of decisions when it comes to my retirement finances :-) The spreadsheet is my best friend!

[@gmprouse874]

Really good to know. You have expertly explained it to simple calculations. Thanks for another wonderful video!

[@ramesherrabolu1590]

Thanks for the video. It seems it is better to pay into Roth than Non-Roth so as to avoid distributions jack up the "Combined Income".

[@mariloumesserly7977]

So helpful..I appreciate the way you make the confusing easy to understand!

[@kellyyork3898]

Agree. Why wasn’t he my algebra teacher? I could have learned so much more. ; )

[@dougniwa8886]

Exactly what I was looking for. Thanks!

[@JBoy340a]

Good video. It's a shame that any of your SS is taxed, but it is good to see the calculations to minimize the taxable amount.

[@jhors7777]

Thank you for posting this helpful Video. I really enjoy and appreciate your videos and your channel.

[@dc1741]

I just use the worksheet (page 32 of 114 in the 2023 1040 instruction book). From what I see, there is only one unique answer for a given situation, i.e., no picking btwn Case 1, Case 2, Case 3, etc.

[@dionysus2006]

Good video ! If I would have been able to keep all the money I paid in SS tax in my job over the last 40 years I wouldn't need SS. A failed system

[@ag4allgood]

Great explanation Geoff of a confusing topic.

[@AhJodie]

Makes my mind spin, but, thank you!

[@sharonl4821]

Excellent example - very helpful!

[@akontilis1792]

What a good video! I hope more people find this one!

[@stevennevins6643]

Spend $40 on TurboTax, plug-in all of your income, including social security, hit the return key, and TurboTax calculates the taxed amount.

[@keithtimmons378]

Thanks much. Practical, usable subject matter.

[@oliverw3646]

Excellent presentation! Thank you.

[@richardc488]

Thank you mr Schmidt

[@TheDealHunter]

Geoff - I find it interesting that you use the correct term, "combined income". Many other financial professionals call it, "provisional income". Do you have any idea where the term "provisional income" originated and why it has such widespread use?

[@ForestToFarm]

I would think to aid in keeping us all confused so we pay someone to take care of our finances. Terry

[@603storm]

Does a tax program like turbo tax have these calculations and recommend the best option?

[@vanthof9852]

Thank you, I've never seen options #2 or #3 before. Very helpful

[@Eric-JohnDavis]

Can you share the "simple" worksheet you said was downloadable?

[@OnCashFlow]

Thanks for the new knowledge!

[@dogsarefun2]

buy tax software (i use hr block). You can make multiple tax returns to see tax liabilities for various incomes....

[@km-bo3zx]

I do the same.

[@paulforbes1217]

IRS form W-4P is written in Klingon. Please do a video on this new IRS nightmare. Thanks

[@pameliarobinson7557]

If you use software like Turbo Tax to do your taxes, does it calculate these numbers for you and figure out the best one? Or is this something I need to do manually?

[@j.patrickmoore9137]

You beat me to that question...

[@barbiec4312]

Yes, I need to know this too.

[@johnscott2746]

Yes all of this is programmed in to the online tax programs.

[@williamwells1862]

Thx, I am cornfused. Dats Y I have an accountant who worked for the IRS.

[@CritterCamSoCal]

Did not know about the 3 tests Great Vid.... does Tax filing Software calculate this ?

[@scottstebbins2841]

Could you explain military retirement as income for SS?

[@terryB4713]

Thankyou for Great information

[@kenc2257]

Thank goodness that tax software handles these calculations (and selects the most correct--the least amount--of tax due). [at least, I hope that's happening...]

[@Valeriafrances13]

Hi, thank you for the presentation - the link to the worksheet no longer works - I was interested in checking it out - thank you

[@josegallegosdds]

That is kind of complicated. But well explained. Are Medicare premiums deducted from Social Security benefits before taxes?

[@apga1998]

No they are not. Your taxable social security income( for the purpose of determining your combined income) is based on your Gross Benefit, not the amount remaining after your Medicare premium is deducted. The net amount is what is you receive each month. You do get to claim a standard deduction. This will reduce your taxable income.

[@sharilyn61]

Yes. Premiums are deducted pre tax, and you have to pay taxes on them.

[@davidgavney6711]

I have not seen all three tests anywhere before. Most people explaining this either do Test 1 and Test 3, or just Test 3, but with 85%. Only one other site did Test 3 with 35% (and they also had Test 1 with 85%). I've never seen Test 2 before with 50% of the total SS payment. It is very hard to find where the accurate source of information is when all these KZbinrs are explaining it different ways. Most people I've seen so far just explain it with Test 3 with 85%. Update: I found the IRS Worksheet 1 and examples where this is done (Pub 915). The reason why 35% is used in Test 3 is because 50% is used for the entire amount subtracting the lower threshold, so you only need 35% more for the upper threshold to make 85%. Test 1 and Test 3 are in there by default and the lower amount is chosen. Not sure if Test 2 is in there or it's a different Worksheet. There are nuances when lower income levels are used when trying to compare it to other KZbinr's videos. It didn't always tie out to the formula above exactly, but I may have missed something, or there may be assumptions I'm not using.

[@brianarbenz1329]

This was helpful. Thanks!

[@cindyvitale9515]

Thank you. This was incredibly helpful.

[@rossmcgreg6r642]

Question: with the three different tests: options you gave, if I use the govt. tax program how does it figure out which one to use? Does it use the one that benefits me or the one that benefits the govt.?

[@MrWaterbugdesign]

I'm 66 and getting ready for a move to SE Asia and finding a great wife. Pretty cool that I'll get a break on taxes as I can use combined income.

[@jeffklein602]

It's not easy, buy you certainly helped! Thanks.

[@diannastavros5086]

Thank you for the information. I was unaware of option 2 and option 3. After the video I looked on the SSA website and could not find this information. Would you post a link to where this information is? The link you posted to the SSA only explained option 1.

[@shadymac8387]

this is PURE evil to pay out da wazoo for 40yrs then get taxed on what they stole in the first place!

[@jamessloven6676]

I am retiring shortly at age 62 and will start receiving my SSi benefit immediately while my wife will continue to work until age 65. Our income sources will be my SSI, my wife's W-2 income and monies derived from the rental real estate we own. My question is whether or not the rental income will used in the SSI taxation formula?

[@edwardbutka4750]

You indicate that "tax free income" like municipal bond income must be included. Would that also include distributions from a Roth IRA?

[@rickdunn3883]

I dont think Roth distributions (after 5 years) count towards combined income.

[@f430ferrari5]

One portion which seems to be missing from this vid is the Standard Deduction. The SD increased significantly under the Trump tax cuts. So even in Jeff’s formula where $16,200 of SS is subject to tax this is then added to the 36,000 agi So 16.2k + 36k = 52.2k now deduct 26k or so standard deduction. This is only 26,200 of taxable income. The first 20,500 is at 10%. 2,050. The next 5,700 is at 12%. 684 So 2,734 in Fed taxes from 76k income. This is an effective tax rate of 3.6% And here is another kicker. Who would have 36k AGI. If this is from IRA withdrawals then at a 4% annual withdrawal would be 900k balance. The numbers not very realistic. Most will have a bigger SS and smaller IRA withdrawal. So taxes even lower. If one has a pension it’s a bit different.

[@sandsleeper3124]

I tried checking last years taxes using your worksheet to make sure I paid the least amount in taxes. I noticed what you call AGI or adjusted gross income is different form what the IRS calls AGI. Your AGI does not include Social Security income but AGI in the 2022 form 1040 (line 11) includes Social Security payments (line 6b added in line 9).

[@HighCountryRambler]

Didn't he state you use 50% of your SS income for AGI? One of the first slides.

[@Bruno-ho5jl]

As a matter of fairness I have no problem paying FITs on my social security benefit since my employers contributed approximately half of my total contribution. The employers was a deductible expense for them and that income to me has never been taxed. Anyone who says they should not be taxed on social security income because they have already paid taxes on it is incorrect. They have only paid taxes on one half of their total benefit. However I do think the income thresholds should have been indexed at origination of the law as it was inevitable that wage inflation would push most incomes above the thresholds. If they had been indexed the threshold for a single person would be almost $79K while a married couples would be almost $99K.

[@schadlarry]

I don't see a test 2 as an option. IRS does have a worksheet for the calculation which is basically test one or three but your examples are more straight forward.

[@keithmachado-pp6fv]

Does turbo automatically calculate which of the 3 options is best.

[@ramesherrabolu1590]

Do you have a video that explains the taxable amount one arrives at by combining "Adjusted Gross Income" plus "Taxable Amount of Social Security Benefits"

[@MILGEO]

I wonder what is considered income in this scenario? Interest, short term capital gains, long term capital gains, IRA withdrawals, income from a part time and full time job, or are they still working on how to make it more complicated?

[@Satjr35031]

Income is Income except if it’s a Roth IRA

[@yourpalfranc]

I've tried a couple of different browsers, but have been unable to download the worksheet??

[@kellyyork3898]

So you just get to choose the lowest number and put that number on the tax form where it asks for your yearly SSA payments instead of your ACTUAL yearly SSA payments. If that’s so, why doesn’t Turbo tax calculate it for you?

[@JohnMainerd]

Geoff - 9 years till retirement and I've creating a retirement earnings, costs and taxes workbook based on what I currently anticipate as where my wife and I will be. In this workbook I've created a spreadsheet with the formulas for the 3 tests on calculating social security taxes. The workbook will update automatically when I change the yearly variables, such as new salaries, projected social security benefits, tax thresholds, etc. While I'm glad you created the worksheet for us to use to do this I've been looking for where on the IRS and/or Social Security websites that this test is available for retirees to use. This way I can look every year to see if the rules have changed so I can adjust my spreadsheet(s) accordingly. Can y ou tell me where I can find this?

[@harborviewmanorresident6316]

I just created a spreadsheet using the calculations on the 1040 SS Worksheet. Not a difficult task. Worked perfectly using this example in the video. It automatically used option 3 just like the IRS 1040 worksheet does.

[@Morpheus197]

Hi Geoff, the link to the worksheet appears to be broken.

[@RLMUnbelievaaable]

Is the tax owed calculated on the amount over the threshold, or the entire amount? Thank you.

[@charlesbusch8739]

The rules were passed to tax the top ten percent of taxpayers receiving social security. By not indexing these thresholds about 90% are now taxed on some portion of their social security income. Simple solution raise the thresholds by indexing amounts for inflation.

[@alycewhite2501]

Thanks for video. When I retired I received a pension from work. At 65 I started taking my SS payment. If half of my SS payment plus my pension (which is already having federal taxes taken out) equal $31,000 / yr, can you help explain to me how much I will be taxed? Any help would be appreciated as this is way over my head. Thanks.

[@greganderson963]

So the government gives with one hand and takes back with the other.

[@DAS2165]

what about married filing single ? which bracket???

[@shawnwarren7333]

Good info. I had never heard of these 3 tests. I looked for worksheets (including from the IRS). They talk about the thresholds but then say you owe 85%. Where do I find these 3 tests? Would I be able to hire you for tax prep? Your website didn't mention anything about it.

[@kellyyork3898]

These formulas appear to be designed to benefit those who have more income coming from social security than they do other sources. Correct?

[@yazminmojica4458]

You’re the best! Thank you ❤

[@jacobkowski7705]

On 3 test slide, where did test 2 come from? I have never heard of this

[@jalatlaco9827]

Any government entity that has a 100,000 page website needs to be simplified, streamlined and downsized. How much of our income taxes go JUST to keeping this going?

[@outwestexplorer1966]

Not only should social security not be taxed, the government should be paying us interest for all the years they have been taking social security from us.

[@SandfordSmythe]

They do

[@PasspointComics]

When do you actually pay for social security taxes?

[@HolySchmidt]

It depends on your situation, but either quarterly or on April 15th depending on how much income tax you owe in totality.

[@bryonmorgan971]

Love you videos. But worksheet link = 404 error: Page not found

[@cherylcampbell7495]

Received my 8.7 raise and what a joke. My bills went up $55.00 more a month.I was better off before the ssa raise.

[@dgillette14]

I think your use of the term Adjusted Gross Income is inaccurate when calculating combined income. Since AGI (Line 11 Form 1040) includes the social security benefit, it would be better to use the term Other Earned Income as the SS website does. Combined Income = Other Earned Income + 50% of SS benefit. Thoughts?

[@tcuster55]

Where did test 3 come from? Seems like everyone would benifit from thar. I didnt see that one on the reading I was doing.

[@brandondixon2303]

Thanks Geoff!

[@jacobkowski7705]

On his 3 test slide, I think AGI is a typo. It should be other income except for SS or something. AGI is an amount that contains taxable SS already, so it doesn’t make sense 😊

[@Bergarita]

I just started receiving SS benefits this year-2024. I did a pro-forma tax return using my actual 2023 return and adjusting it for expected SS payments this year and submitting quarterly Federal Income Tax estimates to the IRS. My question is will tax preparation software like Tax Cut and Turbo Tax automatically select the best option for you?

[@user-rv3yj4sn2n]

The link you provided downloads a photo of this webpage -- not a worksheet.

[@HighCountryRambler]

Wondering if (passive) rental income is included in the AGI equation?

[@torchy187]

Great video. Does a military pension count towards combined income? Thank you!

[@rhosk]

Yes, military pension does count.

[@ltcdave]

Your pension counts for federal taxes, but not for some state income taxes.

[@crissiecook2207]

My husband and I are both on Social Security and take out 15% for each of us monthly. We had to get a new roof so I took my pension and paid the 20% interest rate to cash it out and we’re able to pay for the roof plus some of our savings. Will us taking out 15% monthly help reduce the amount we will pay at tax time?