Talk:Taxation of Social Security benefits

--Watty 20:50, 28 January 2012 (CST)--Watty 20:50, 28 January 2012 (CST)

Is there an error in the married taxpayers table or I am looking at it wrong?

In the second row the column for the "Taxable SS" number has 3,267 but with (18,653 - 12,000) * 0.5 I get 3326.5. This may have also thrown the first column off too if it isn't right.

I was trying to make a spreadsheet of this with my numbers and found the difference when I put the example from the wiki into it so it could be a problem with my spreadsheet.

Number corrected; thanks. Grabiner 11:10, 29 January 2012 (CST)

Reader feedback: I have been trying to find P...
71.61.232.7 posted this comment on 19 February 2014 (view all feedback).

"I have been trying to find Publication 915 'Worksheet 1' to copy without having to print the whole publication?"

Any thoughts?

Blbarnitz 15:00, 19 February 2014 (CST)

Just print Page 16 of the document (2013 Publication 915 - p915.pdf), which can easily be done with Adobe Reader. --LadyGeek 20:02, 19 February 2014 (CST)

Reader feedback: I'm wondering if the 9,617 T...
205.234.17.32 posted this comment on 11 March 2014 (view all feedback).

I'm wondering if the 9,617 Taxable SS in the Married Taxpayers table should be 12,148 instead.

9,617 = 6,000 + 50% * (31,233 + 40,000 / 2 - 44,000) 12,148 = 6,000 + 85% * (31,233 + 40,000 / 2 - 44,000)

Subsequent columns would also need to change accordingly. Thanks! Very useful information!!

Any thoughts?

LadyGeek 15:52, 11 March 2014 (CDT)

Reader feedback: worksheet to figure your tax...
67.248.226.109 posted this comment on 14 March 2014 (view all feedback).

"worksheet to figure your taxable social security"

I have added a description of where to find the worksheet. Duplication of an IRS form (worksheets) is out of scope for this article. LadyGeek 14:56, 14 March 2014 (CDT)

Reader feedback: need actual formula for taxe...
71.60.220.230 posted this comment on 24 May 2014 (view all feedback).

"need actual formula for taxes on SS. The words not making sense. How about a formula?"

Any thoughts?

LadyGeek 15:46, 24 May 2014 (CDT)

Reader feedback: When did taking SS benefits...
76.184.143.131 posted this comment on 10 January 2015 (view all feedback).

"When did taking SS benefits first go into law?"

Any thoughts?

Peculiar Investor 14:41, 10 January 2015 (CST)

A history of Social Security is here: Social Security History. From the FAQ:

Q1: When did Social Security start?

A: The Social Security Act was signed by FDR on 8/14/35. Taxes were collected for the first time in January 1937 and the first one-time, lump-sum payments were made that same month. Regular ongoing monthly benefits started in January 1940.

However, the question is off-topic for this page. It's more appropriate for Social Security, but that page needs to remain focused on the benefits aspect. I don't think any updates are needed. --LadyGeek 08:40, 11 January 2015 (CST)

Reader feedback: states that limit Soc Sec pa...
71.93.224.7 posted this comment on 20 March 2015 (view all feedback).

"states that limit Soc Sec payments because of State Teachers' pension!"

I found this reference: Social Security Offsets: Frequently Asked Questions, by the National Education Association. There are other references which corroborate this website, but they are opinionated in terms of reforming Social Security's Windfall Elimination Provision (WEP): states that limit soc sec payments because of state teachers' pension - Google Search.

LadyGeek 13:53, 21 March 2015 (CDT)

Thinking further, this comment relates to the payment of Social Security benefits - not taxation of benefits. The suggestion should not be incorporated. --LadyGeek 16:49, 21 March 2015 (CDT)

Reader feedback: For a single taxpayer, why d...
156.77.111.16 posted this comment on 30 October 2015 (view all feedback).

"For a single taxpayer, why do you show the Tax Bracket for Taxable Income of $9,225 as 15% when the 2015 tax rate schedule shows it as 10%? And for taxable income of $37,450 you show the tax bracket as 25% instead of 15%? The same questions are for married taxpayers whose taxable income is $18,450 and $74,900?"

Any thoughts?

LadyGeek 23:19, 31 October 2015 (UTC)

The $9225 and $37,450 are the bottom of the 15% and 25% tax brackets, so the tables are correct. If your non-SS income is at least $19,050, your taxable income is at least $9225, and thus you are in the 15% tax bracket and your marginal tax rate is 22.5%.--Grabiner 03:35, 1 November 2015 (UTC)

Reader feedback: Information about Missouri s...
97.88.69.212 posted this comment on 27 May 2018 (view all feedback).

"Information about Missouri showed the Mississippi laws and NOT Missouri -- info needs to be fixed !"

Missouri taxation of Social Security benefits is correct as shown. See: FAQs - Individual Income Tax, from the Missouri Department of Revenue, "How is my social security or social security disability taxed?". --LadyGeek 12:16, 28 May 2018 (UTC)

Point above which 40.7% marginal rate is possible
The point above which 40.7% marginal tax rates is possible is when total taxable income is at the 22% tax bracket threshold and the maximum 85% of Social Security benefits are taxable. It is the combination of $$SS$$ and $$OI$$ that satisfies these two equations:

$$0.85 \cdot SS + OI - SD = BT$$

$$0.5 \cdot (UB - LB) + 0.85 \cdot (RI - UB) = 0.85 \cdot SS$$

Rearranging the first equation to solve for OI gives:

$$OI = BT + SD - 0.85 \cdot SS$$

Save this result for later substitution. Substitute the definition of relevant income into the second equation:

$$0.5 \cdot (UB - LB) + 0.85 \cdot (OI + 0.5 \cdot SS - UB) = 0.85 \cdot SS$$

Substitute in the formula for OI from the rearranged first equation:

$$0.5 \cdot (UB - LB) + 0.85 \cdot \left ([BT + SD - 0.85 \cdot SS] + 0.5 \cdot SS - UB \right) = 0.85 \cdot SS$$

Collecting the SS terms from the left hand side:

$$0.5 \cdot (UB - LB) + 0.85 \cdot (BT + SD - UB) + 0.85 \cdot (0.5 \cdot SS - 0.85 \cdot SS) = 0.85 \cdot SS$$

Simplifying the SS terms on the left hand side:

$$0.5 \cdot (UB - LB) + 0.85 \cdot (BT + SD - UB) - 0.2975 \cdot SS = 0.85 \cdot SS$$

Solving for SS and labeling this value SS* gives:

$$SS^{*} = \dfrac{0.5 \cdot (UB - LB) + 0.85 \cdot (BT + SD - UB)}{1.1475}$$

Recalling the equation above for OI in terms of SS, and labeling this value OI* gives:

$$OI^{*} = BT + SD - 0.85 \cdot SS^{*}$$

22.2% bump begins
For single filers, the 22.2% bump begins in the middle of the 12% bracket when Social Security taxation begins to be taxed at an 85% marginal rate. This occurs when:

$$0.5 \cdot SS + OI = UB$$

Substituting $34,000 for UB gives:

$$OI = $34,000 - 0.5 \cdot SS$$

For married filers, the 22.2% bump begins at the boundary between the 10% and 12% brackets. The line is defined by the solution to these equations:

$$0.5 \cdot (UB - LB) + 0.85 \cdot (RI - UB) = p \cdot SS$$

$$OI + p \cdot SS = BT + SD$$

where $$p$$ is the percentage of Social Security income that is taxable. $$p$$ is an unknown variable, but with two equations and three unknowns it should be possible eliminate $$p$$ through substitution. Solving for $$p$$ in the second equation gives:

$$p = \dfrac{BT + SD - OI}{SS}$$

Substituting this value for $$p$$ into the first equation, and also the definition of relevant income, gives:

$$0.5 \cdot (UB - LB) + 0.85 \cdot (OI + 0.5 \cdot SS - UB) = BT + SD - OI$$

Expanding the large term on the left hand side gives:

$$0.5 \cdot (UB - LB) + 0.85 \cdot OI + 0.425 \cdot SS - 0.85 \cdot UB = BT + SD - OI$$

Rearranging to solve for OI:

$$1.85 \cdot OI = BT + SD + 0.85 \cdot UB - 0.5 \cdot (UB - LB) - 0.425 \cdot SS$$

The solution to this set of equations is:

$$OI = \dfrac{BT + SD + 0.85 \cdot UB - 0.5 \cdot (UB-LB)}{1.85} - \dfrac{0.425 \cdot SS}{1.85}$$

$$\dfrac{0.425}{1.85} \approx 0.22973 \approx 0.23$$

Substituting $19,400 for BT, $27,000 for SD, $44,000 for UB, and $32,000 for LB gives:

$$OI = $42,054.05 - 0.22973 \cdot SS$$

22.2% bump ends
The 22.2% bump ends when the maximum of 85% of Social Security benefits becomes taxable. This occurs when:

$$0.5 \cdot (UB - LB) + 0.85 \cdot (RI - UB) = 0.85 \cdot SS$$

Substituting the definition for relevant income gives:

$$0.5 \cdot (UB - LB) + 0.85 \cdot (0.5 \cdot SS + OI - UB) = 0.85 \cdot SS$$

Expanding the large term on the left hand side gives:

$$0.5 \cdot (UB - LB) + 0.425 \cdot SS + 0.85 \cdot OI - 0.85 \cdot UB = 0.85 \cdot SS$$

Rearranging to solve for OI gives:

$$0.85 \cdot OI = 0.85 \cdot UB - 0.5 \cdot (UB - LB) + 0.425 \cdot SS$$

Dividing by 0.85 gives:

$$OI = \left ( UB - \frac{0.5}{0.85} \cdot (UB - LB) \right ) + 0.5 \cdot SS$$

For single filers, substitute $34,000 for UB and $25,000 for LB and the result is:

$$OI = $28,705.88 + 0.5 \cdot SS$$

-- Section created 02:03, 20 May 2019‎ by Fyre4ce (--LadyGeek 20:33, 20 May 2019 (UTC))