Risky Bet: Social Security Payments

We say risky because whether or not your Social Security payments are going to be taxed depends on what state you live in and the amount you are receiving from these payments. For some, Social Security payments are not going to be taxed no matter what, but for many, that is not the case.

If you plan to live off your Social Security retirement payments alone, then you are safe when it comes to income tax. Yet, if you have other income as well and you earn over a certain threshold, then you will have to pay taxes on some or most of your payments.

When looking at how Social Security was taxed in 2022, we can see that people who had under $25,000 in combined income did not pay taxes, but those who had a combined income of up to $34,000 had to pay taxes on up to 50% of the benefit amount they received. Those who had earned over the threshold of $34,000 had to deal with up to 85% of their income from Social Security being taxed. And this happens even when you are going over by just a couple hundred dollars.

If you are a joint filler, they started to be taxed up to 50% on incomes between $25,000 and $44,000, with those that went over the larger sum going up to possibly facing 85% taxes on their income from these payments.

If you were wondering, “combined income” is defined by the Social Security Administration as the adjusted gross income together with the interest that is not subject to taxes and half of the Social Security benefits! More information about this can be found on the government’s site!