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kaylewis49
Contributor ⭐
July 18, 2021

Federal taxes on Social Security

  • July 18, 2021
  • 8 replies
  • 6605 views

Is anyone working on getting Congress to raise the $25000 income threshold on taxing SS? If it had kept up with inflation, it would be over $50,000 today and not affect more than 50% of SS recipients.

    8 replies

    Tonster521
    Community Champion ⭐
    July 22, 2021

    @kaylewis49 I agree with GaiL1's comment that the SS program needs the money. So, the chances of amending taxation of  SS benefits are probably not going to be a front  burner issue for Congress. Plan accordingly.  Please note that the $25,000 threshold which was enacted in 1983 has been in place for about 36 years. If indexed to inflation, that threshold would be in the $50,000 range using 2% as an inflation rate. If using 3%, that threshold would be closer to $70,000. It gets progressively worst using inflation factors greater than 3%.

    GailL1
    July 18, 2021

    Haven't officially heard anything but I extremely doubt it will happen because the Social Security Trust Fund needs this money - that's where it goes; not to the General fund.  

     

    President Reagan created the tax in 1983 but only on 50% of it.  Think of this as the 50% that your employer contributed which wasn't taxed while you were working and contributing (employee & employer).  That was the Social Security Amendment of 1983 which saved the financial woes of the Trust Fund it was going through back then.

     

    A provision of the 1993 Omnibus Budget Reconciliation Act raised the Social Security tax rate from 50% to 85% for households in a higher income bracket. The act was Democratic President Bill Clinton's first budget and marked the highest peace-time tax increases on high-income earners in U.S. history up to that time, according to the University of California, Berkeley.  

     

    Biden, a Congressman at the time, voted to pass the 1983 amendments, according to records maintained by the SSA. GovTrack, a government transparency website, recorded Biden's yea vote on the 1993 Act.

     

    USAToday Fact Checker:  10/16/2020 - Fact check: Biden voted to tax Social Security, wants to reform retirement benefits

     

    They didn't tie the figure to inflation - purposely because as time went by, it covered more and more people and thus the revenues from it gets bigger and bigger.

      Tonster521
      Community Champion ⭐
      July 22, 2021

      @GailL1 Once again, you have provided pertinent information regarding the subject. The 85% threshold that was enacted in 1993 is brutal. The thresholds for single/married or $34,000/$44,000 are met by more and more folks year after year. It has been 27 years and at a 3% inflation rate, those thresholds should be approximately $75,000/ $97,700. I rounded fractions to get to whole numbers. It is sad that Congress has placed such a burden on the backs of the SS beneficiaries. So, I will try to provide a numerical example for all readers to illustrate, in dollars, the impact. A person or married couple that exceed the 85% thresholds ($34,000/$44,000) and receive $18,000/year in SS benefits would pay about $1,836 more in Federal Income Tax (FIT) if in the 12% tax bracket ($18,000 X .85 X.12) or $3,366 more FIT if in the 22% tax bracket ($18,000 x .85 X  .22). To be fair to the folks in Congress, I found an article from the NY Times that communicates an effort to reduce the 85% taxation. At that time, President Clinton advised that he would veto such legislation. Hopefully,  I copied it correctly. https://www.nytimes.com/2000/07/28/us/house-passes-bill-to-reduce-benefits-tax-passed-in-93.html

        TerryZ726905
        Contributor ⭐
        August 6, 2025

         I have written to my congressman pointing out that the thresholds have not been amended since 1993.  As someone stated, the amounts would be $71K and $97K if increased by the COLA applied to Social Security payments.  I received responses from them.  One pointed to the additional $6K deduction in the new bill.  The other two discussed keeping Social Security solvent.  None of them wanted to address eliminating taxes on Social Security or even modifying the threshholds.

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