Social Security Question

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VINNY
Posts: 449
Joined: Wed Mar 28, 2007 9:07 pm

Social Security Question

Post by VINNY »

Hello Diehards,

My parents are retired and my dad is currently collecting social security benefits. My mom is thinking about going back to work part-time for medical insurance and she is 57 years old collecting a pension. My dad is 71 years old and he also collects a pension. They live in Florida and file a joint return.

The question I have is how much can my mom earn before they start taxing my dad's social security benefits. Is there a threshold where once you cross it, social security benefits are fully taxable?

If social security benefits are gradually taxed, then at which dollar amounts and at what percentage will social security benefits be taxed.

To clarify my question, if my mom earns 8,500.00 from her part-time job, she receives 21,000.00 from her pension, my dad receives 12,000.00 in social security benefits and they receive another 14,000 in interest income, how will my dad's social security benefits be taxed. My dad also receives a pension of 1,200.00 annualy.

Thanks for all your help...
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Karl
Posts: 1074
Joined: Sun May 13, 2007 5:52 pm
Location: Milwaukee, WI

Re: Social Security Question

Post by Karl »

VINNY wrote:Is there a threshold where once you cross it, social security benefits are fully taxable?
Up to 85% of SS benefits can be taxed by the IRS. Wisconsin is "nice" in that they only apply confication to 50% of SS benefits.

Getting to a level where SS benefits are taxed is no difficult task. Until my after my father died my parents always had 85% subject to taxation without exception and it's not like they were making big money. IRA RMDs alone would have been enough to push them to that max of 85% being taxable -- this is the reward you get for being a saver. Moral of the story: waste your money when young I guess.

Filing single, for the first time ever for 2006, my mother was able to avoid any tax on her SS benefits.
earlyout
Posts: 1436
Joined: Tue Feb 20, 2007 5:24 pm

Taxed SS

Post by earlyout »

Vinny,

Based on my calculations, if all of the income you mention is taxable and you use the standard deduction, 85% ($10,200, the max) of the SS benefit will be taxed in 2007. If you remove the $8500 of income from working, only 43% of the SS will taxed. Total federal income tax with the job would be $4670, without the job, $2630.

EO
Target2019
Posts: 487
Joined: Sat Mar 03, 2007 5:30 pm

Re: Social Security Question

Post by Target2019 »

VINNY wrote:To clarify my question, if my mom earns 8,500.00 from her part-time job, she receives 21,000.00 from her pension, my dad receives 12,000.00 in social security benefits and they receive another 14,000 in interest income, how will my dad's social security benefits be taxed. My dad also receives a pension of 1,200.00 annualy.
Last year they would have had a federal tax of $463.00. The SS benefits were not taxable.
earlyout
Posts: 1436
Joined: Tue Feb 20, 2007 5:24 pm

Let's clarify the taxes

Post by earlyout »

For married filing joint, when other income plus 1/2 of the SS is over $32000 the SS benefit starts to be taxed. The amount of SS that is taxed increases to a maximum of 85% of the SS as income increases.

In your case, taxable income is $8500 from working, $14000 interest and $22,200 from pensions for a total income before SS of $44,700. This, plus 50% of the SS, is over the threshold where 85% of SS is taxed. The total adjusted gross income will be $44,700 plus $10,200 (85% of $12,000) = $54,900. Subtracting the standard deduction ($11,750) and 2 personal exemptions ($6800) leaves a 2007 taxable income of $36,350.

Without the job they will not reach the 85% max on the the SS and only 43% of the SS is taxed.

EO
Target2019
Posts: 487
Joined: Sat Mar 03, 2007 5:30 pm

Missing Information

Post by Target2019 »

Without seeing the 1099-R for the pension, we do not know for sure. Is "taxable amount not determined" checked, or not?
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