Calculating the amount of your SS benefit which is taxable

(with as little complication as I could manage so far)

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• This page may be a little out of the character of WikiLearn so far (which was intended as my learning notebook mostly for computer related stuff) -- you might consider this page somewhat experimental as I prepare to expand the scope of WikiLearn (and, if necessary, move it to a new hosting site within the next few years).

Introduction

To me (for me) I'd like to have an intuitive feel for how much of my SS is taxable -- I don't get that from the worksheets, but I've finally worked it out (I think) (currently on paper, working on transcribing it here).

At this point in time, I'm not 100% sure everything on this page is correct and complete.

With respect to completeness, though, I'm trying to keep it somewhat simple, so if there are additional complicating factors I should add to cover more unusual situations, I will aim to add them near the bottom of the text maybe as sort of exceptions or additions to what I wrote here.

Or, just say that this is a simplified view, your tax situation may be more complicated and other factors may need to be considered.

Definitions

First, I need to define some things or look up some definitions:

• (gSSN) Gross SSN benefit (maybe abbreviate gSSN?)

• (OI) Other "ordinary" income (e.g. (from below) wages, pension, IRA withdrawals, dividends, capital gains, interest, including tax-exempt muni bond interest) -- i.e., you have to add back any tax exempt interest that you received -- (maybe abbreviate OI?) you have to include many types of income that you might not otherwise consider -- some deducted amounts have to be added back -- for me, mostly this is not an issue -- if I ware a partner or something like a major shareholder in a (type S?) corporation or a landlord (or farmer?) I might have to add other things back -- I don't know, I didn't dig that deep.

• (OISSN) For purposes of this calculation, you have to include 1/2 of your gSSN in your income, maybe abbreviate as OISSN?

• (DED) There are a few items that are excludable from the income used in this calculation, (e.g., (from below): "Above-the-line deductions. These include deductible contributions to HSA, traditional IRA, SEP-IRA, and SIMPLE IRA, and deductible self-employment tax and self-employment health insurance." -- I don't know what "above the line refers to -- probably something on the 1040?)

• (IAdj) So the income to be used in this calculation is OI + 0.50(gSSN) - DED), and then:

• (SSNtax) The amount of your gSSN that is taxable.

Calculations -- constants for single people, different if married

I'll use the numbers for a single person here, if you are married there are different numbers (see, e.g., Note 1), depending if you file jointly or separately and if you lived with your spouse anytime in the relevant tax year.

If IAdj is less than $25,000 (your base amount)

none of your SS is taxable

If IAdj is between $25,000 and $34,000

calculate the SSNtax as:

0.50 * (IAdj - $25,000) but not to exceed 0.50 * gSSN

If IAdj is greater than $34,000,

calculate the SSNtax as: <double check this against the calculator)

0.50 * $9,000 + 0.85 * (IAdj - $34,000) but not to exceed 0.85 * gSSN

Notes

Note 1: the $34,000 comes from the $25,000 base amount plus $9,000 for singles, for married people that ($9,000) number is different, for at least some married people that number is $12,000 -- I didn't dig deep enough to see if the number is the same for all married people. Thus, for those married people for which $32,000 is the base amount and the <oops, darn, didn't finish this, and, as I am not married, won't bother with atm -- maybe a "cloudsourcer" will come along and finish / clarify this point>.

Note 2: Above a certain figure (from memory around $120,000 for a single person) your contribution to your Medicare coverage increases -- more tomorrow or soon, on a separate page (sometimes called the Medicare cliff). Brainstorming names for that other page: MedicareCliff, ???

Note 3: Above another figure (from memory maybe around $200,000 (is that for single or married?), there is another penalty -- investment income above that figure is subject to a 3.8% surtax. I need to clarify that -- first attempt: if your total income is above that limit, then any investment income above that figure is subject to that 3.8% surtax -- still not very clear -- on another page I'll give some examples. Brainstorming names for that other page: Medicare3p8%Surtax (is it specific to / for Medicare?), ???

Note to deal with someday: a "." in the above link makes TWiki think Medicare3 is a new / separate web -- tentatively using p in place of . -- might consider other options, e.g., _, ???

Resources / Data

`= Base amount. Your base amount is: •$25,000 if you are single, head of household, or qualifying surviving spouse; •$25,000 if you are married filing separately and lived apart from your spouse for all of 2023; •$32,000 if you are married filing jointly; or •$0 if you are married filing separately and lived with your spouse at any time during 2023. ='

• Calculator: How Much of My Social Security Benefits Is Taxable? -- some useful descriptions / definitions:

` Other income (wages, pension, IRA withdrawals, dividends, capital gains, interest, including tax-exempt muni bond interest):

Above-the-line deductions. These include deductible contributions to HSA, traditional IRA, SEP-IRA, and SIMPLE IRA, and deductible self-employment tax and self-employment health insurance. '

Contributors

• () RandyKramer - 2024-11-04
• () RandyKramer - 2024-11-28 (noticed I had left out something about married people, added a "reminder" note, and now some wordsmithing, reformatting, more soon, maybe this weekend)
• If you edit this page: add your name here; move this to the next line; and if you've used a comment marker (your initials in parenthesis), include it before your WikiName.

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