The Social Security Administration sets the rules and beneficiaries should learn about them. So, if you have not filed for retirement benefits or you have just done, there are a few things you should know. Even if you already collect them for some time and you are between 62 and 66, you need to know this.
The good thing about these tips is the fact that they are legal. So, you will just need to stick to the limits or thresholds that Social Security has established. By doing so, you will not have to pay taxes to the Administration.
If you are just collecting Social Security retirement checks and you do not have other sources of income, you should not worry about it. In that case, you may not have to pay any taxes at all. However, if your combined income is over the cap, you will have to pay some money.
Why do I have to pay income taxes to Social Security?
Some Social Security beneficiaries may have to pay income taxes on their checks. This is because you have a large quantity of earnings from wages, dividends, interest, self-employment, or any other taxable income.
Remember that if you are on Social Security benefits and have other earnings you must report it on your annual tax return. The Administration that you will pay taxes on up to 85% of your benefits.
This rule is not from the Administration, but from the Internal Revenue Service (IRS). The most helpful tip to avoid paying Social Security income taxes is to have a combined income of less than 25,000 dollars (single). Joint filers should have a combined income of less than $32,000 to avoid income taxes.
How much will I pay Social Security on taxes if I have a higher combined income?
Those beneficiaries who file an individual tax return and their combined income is between 25,000 and 34,000 dollars, they may have to pay taxes on up to 50% of their retirement benefits.
The thing is that those with higher earnings will have to pay more taxes. So if you are an individual and your earnings go over $34,000, it could be up to 85%, instead of 50%. So, paying income tax on up to 85 percent of your benefits may be a possibility.
By now you must be wondering what the thresholds for joint filers are. If your spouse and you have a combined income that is just $32,000 or up to $44,000, you may have to face an income tax of up to 50%.
If your combined income is more than $44,000, you will have to pay taxes on up to 85% of your retirement benefits. Those who must pay taxes can make estimated payments to the IRS. In this way, they will not have to pay so much when they file their tax returns.