The End of Social Security Taxes?

We analyze the complex taxes on Social Security benefits and how they affect you.

Transcript

00:00Hello everyone and welcome to a crucial analysis of your retirement finances.

00:05During his 2024 campaign, President Donald Trump promised voters that Social Security benefits

00:11wouldn't be cut, nor would the retirement age be raised. But his most ambitious proposal

00:18aimed to stretch every Social Security dollar further, eliminating taxes on these benefits.

00:24However, in the tax bill just passed by the House of Representatives,

00:28that expected tax exemption is conspicuously absent. While many retirees might feel disappointed,

00:35the truth is, paradoxically, they might be better off without it. Currently, taxes on Social Security

00:42income can be quite complex. The government uses a combined income metric to determine what

00:47percentage of your benefits, if any, is taxable. This combined income is calculated by adding half

00:54of your Social Security income, plus your adjusted gross income, plus any untaxed interest income.

01:01If your combined income exceeds certain thresholds, up to 85% of your Social Security benefits could be

01:08subject to taxes. For example, for an individual filer, if their combined income is between $25,000

01:15and $34,000. Up to 50% of their benefits could be taxed. If it exceeds $34,000, it could go up to 85%.

01:25For couples filing jointly, the thresholds are $32,000 to $44,000 for 50%, and over $44,000 for 85%.

01:36Completely eliminating taxes on Social Security, while appealing, could have had significant consequences.

01:41Experts point out that this measure would primarily benefit higher income retirees,

01:47and could shorten the life of the Social Security trust fund, forcing future benefit cuts for everyone.

01:54So, while the promise of no taxes on Social Security fades, it's essential to understand how these rules

02:01work and how to plan for your retirement. The current complexity, though frustrating, prevents a

02:08greater impact on the system's sustainability for future generations.