2023 Social Security Cheat Sheet - Flipbook - Page 16
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 October 11, 2018.
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