2023 Taxes Cheat Sheet - Flipbook - Page 21
2020 UPDATED EDITION:
Retirement Taxes Cheat Sheet
Income Taxes on Social Security Benefits
Social Security benefits are funded using current payroll taxes and then used for income
in retirement, similar to a company pension plan or annuity contract. Starting in 1984, all
current recipients are subject to income limitations, based on modified adjusted gross
income (MAGI), before benefits are subject to federal income taxes. When collecting
benefits, up to 85% of benefits may be taxable based on your total MAGI. MAGI includes
income from most sources, including W-2 earnings, 1099 earnings, taxable distributions
from traditional retirement accounts (IRA/401k) and even some government bonds that
are typically nontaxable. Here are the current income limits and effective percentage of
benefits that become taxable.
Source: Income Taxes on Social Security Benefits. Social Security Administration.
https://www.ssa.gov/policy/docs/issuepapers/ip2015-02.html .
Last Accessed December 30, 2019.
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