A “First of its Kind” PFML Plan launches in New Hampshire
Beginning in December 2022, employers can start enrolling in New Hampshire's new voluntary Paid Family and Medical Leave plan for employers and employees of all types of businesses.
Every working American and every reputable business in the U.S. pays Social Security tax. The resulting dollar amount feeds into the program that funds retirement for citizens who've reached a certain age. But does the taxation stop there?
What happens once a person begins receiving Social Security checks? Here is more information on taxes and Social Security benefits.
Yes, if you reach a certain income. With all taxes, the more you make, the more taxes you pay. For example, if an individual's combined income is lower than $25,000 than it is not taxable. Combined income in these situations includes adjusted gross income and nontaxable interest plus one-half of Social Security benefits. If an individual's total income is between $25,000 to $34,000, up to 50% can be taxed. If the amount surpasses $34,000, up to 80% can be taxed.
For joint tax-filers, a combined total income of $32,000 or less cannot be taxed. The federal government taxes amounts ranging from over $32,000 to $44,000, up to 50%. If a couple's combined total income reaches over $44,000, the government taxes up to 80%.
No matter your income, the federal government cannot tax more than 85% of your Social Security Benefits.
Another yes – yet 'no' answer. Thirteen states do tax Social Security benefits, while 37 do not. Those that do include:
While the idea of double taxation might make you assume a state's tax policy is overly extreme, that may not be the case. While some of these states tax your Social Security benefits, they may be light on taxes elsewhere. The states that don't tax your benefits can be tax-heavy in areas like sales and property taxes. Workarounds and exemptions exist in select states that tax benefits, as well. For example, Connecticut allows joint filers to fully exempt their Social Security income from state income tax if the total combined income earned is less than $60,000.
Thinking about this may be tricky as a payroll or finance professional – but probably more so for an average taxpayer. Bookmark this page as an easy resource to send to employees when and if they should have a Social Security benefits question!