New Bill Would Eliminate Taxes on Social Security Benefits

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abolition of social security

Social Security is one of the cornerstone programs of the American social safety net — even if it doesn’t always fully cover an individual’s retirement costs, it gives everyone something to build on as they plan their golden years. One thing some people may not realize is that Social Security benefits are taxed — even though the money comes from the government to begin with. However, a new bill could change that.

Consider working with a financial advisor for help with retirement planning, including Social Security factoring.

Social Security Taxes: Current Legislation

As of 2022, Social Security benefits will generally be taxable. To see if you pay taxes on your Social Security, you must first find your combined income using the following formula:

Combined income = adjusted gross income (AGI) + non-taxable interest + 1/2 of Social Security benefits

If that number exceeds $25,000, you’ll have to pay some taxes if you’re a single petitioner, householder, or eligible widow or widower with a dependent child. The limit is $32,000 for married couples filing jointly. The exact amount of your Social Security benefit you pay tax on will depend on your total income, but will be up to 85% of your benefits.

Some individual states also tax Social Security income. Be sure to check your state laws.

Social Security Taxes: New Proposal

abolition of social security

abolition of social security

However, a bill currently floating on Capital Hill would prevent the federal government from taking money from Social Security payments. The proposal is from Representative Angie Craig (D.-Minn.) and is known as the You Earned It, You’re Watching It.

“Social Security is a promise we made to the American people — if you work hard and follow the rules, the dignity of a secure retirement is within your reach,” Craig said in a statement.

To make up for lost income, Craig suggests raising the Social Security payroll tax cap from $147,000 to $250,000.

What this means for you?

First, it doesn’t mean anything yet – the law is still just a proposal and there are a lot of steps it needs to go through before it could possibly go into effect. Even if there is currently enough support for the bill on Capitol Hill, elections are coming, and if Republicans take control of the house law in this way, it would probably be dead, at least for now.

That said, there is a possibility that it will happen. If so, high earners will see a little bit more written off from their paychecks each week. However, retirees could potentially see their net benefits rise if the government stops austerity.

The individual changes would be small, but could lead to something worth thinking about. A financial advisor can help you adjust your budget if your paycheck is worth less while you work, and help you make smart use of any extra Social Security benefits you get.

It comes down to

abolition of social security

abolition of social security

Currently, many retirees pay taxes on their Social Security benefits. However, a new bill would get rid of those taxes and make up for the revenue by raising the payroll tax ceiling from $147,000 to $250,000.

Retirement Planning Tips

  • A financial advisor can help you figure out how Social Security plays a role in your retirement plans. Finding a qualified financial advisor doesn’t have to be difficult. SmartAsset’s free tool matches you with up to three financial advisors serving your area, and you can interview your advisors at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

  • Use SmartAsset’s retirement calculator to see how much money you’ll need when you retire and if you’re on track to get there.

Photo credit: ©iStock.com/BackyardProduction, ©iStock.com/mphillips007, ©iStock.com/RichVintage

The post New Law Would Abolish Social Security Benefit Taxes appeared first on SmartAsset Blog.

The Valley Voice
The Valley Voicehttp://thevalleyvoice.org
Christopher Brito is a social media producer and trending writer for The Valley Voice, with a focus on sports and stories related to race and culture.

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