Understanding the Taxability of Social Security Benefits

👀Social Security income has been taxable since 1984, after 47 years of being tax-free.

💰The taxable percentage of Social Security income is not fixed, but depends on your provisional income.

📈Provisional income includes adjusted gross income, tax-exempt interest income, and 50% of Social Security income.

📉There are two calculations to determine the taxable amount of Social Security income, with the lower result used for taxation.

💡Understanding the taxability of Social Security benefits can help in strategic retirement planning.

When did Social Security benefits become taxable?

—Social Security benefits became taxable in 1984.

Are there fixed percentages for the taxation of Social Security income?

—No, the taxable percentage depends on your provisional income.

What is provisional income?

—Provisional income is the sum of adjusted gross income, tax-exempt interest income, and 50% of Social Security income.

How is the taxable amount of Social Security income determined?

—There are two calculations, and the lower result is used to determine the taxable amount.

Why is understanding the taxability of Social Security benefits important?

—Understanding the taxability of Social Security benefits can help in retirement planning and managing taxable income.

00:00In 1935, Social Security benefits were introduced and remained tax-free until 1984.

04:58Provisional income is the key factor in determining the taxable amount of Social Security income.

08:59The taxation of Social Security benefits is not based on fixed percentages but on calculations.

10:01There are two calculations, and the lower result is used to determine the taxable amount.