More and more seniors are finding themselves paying tax on their Social Security benefits. Initially, the threshold to begin taxing Social Security back in 1984 was $25,000 for individuals and $32,000 for joint filers. Back then, that worked out to be only about 10% of all recipients being taxed. Today, the thresholds are the same. No inflation adjustments EVER made! Now, because of JUST that, over 40% of Social Security recipients are being taxed on their benefits.
No adjustment for inflation is a back door way to have more and more folks to start paying tax who just got a small inflation adjustment to their benefits and other income each year. Over time, inflation has increased the cost of living 3 times over. If those thresholds had been adjusted for inflation, today, they would be $73,000 for singles and $93,200 for couples. With those adjusted thresholds, only about 10% of Social Security benefit recipients would be taxed.
Hello Congress? Over 53% of Seniors want this fixed! If nothing else, adjust the dang thresholds for inflation, after bumping those thresholds up to what they should be today if there had been inflation adjustments all along.
But wait, Congress has a problem. Currently, the Federal Income tax collected on Social Security benefits amounts to about $49 Billion. Just cutting that would be very painful, causing some other cuts in spending or increases in other taxes. And that is the reason Congress hasn’t stopped taxing Social Security. They need that money to give to the Ukrainians and the other countries that stand with their hands out expecting Uncle Sam to give them freebies. The US gives away over $38 Billion every year to other countries. In essence, our government is taking money out of the hands of our elderly and giving it to other people around the world. What would happen if the US stopped giving out all that foreign aid and stopped taxing our seniors?
The illustrious occupant in the White House has called for “protecting and strengthening” Social Security, but so far, he has not offered any plan on how to do this. Right now, his political party keeps accusing the Republicans of wanting to tax Social Security. The Republicans have actually offered to sit down and find bi-partisan solutions to fix Social Security.
What can Social Security beneficiaries do to reduce Federal Income tax on their benefits? Convert your IRA to a ROTH IRA. (ROTH IRA distributions are non-taxable and don’t trigger Social Security benefits being taxes.) Purchase tax-free Muni-Bond interest instruments. (Tax Free interest doesn’t trigger Social Security benefits being taxed either.) Buy US Dividend paying stocks. (If your other income is low enough, the first level of tax on such income is zero, also not triggering Social Security benefits being taxed.) Stop earning extra money on side jobs. Usually, you are only getting close to minimum wage, when you factor in the tax triggered on your Social Security benefits, you are probably earning less than minimum wage. Finally, WRITE your congressman to FIX this whole mess!
Have you heard? Deuteronomy 28:50 (speaking of an evil nation who God is sending to punish Israel) says, “A nation of fierce facial expressions, that doesn’t respect the elderly, nor show favor to the young.”
Kelly Bullis is a Certified Public Accountant in Carson City.Contact him at 775-882-4459.On the web at BullisAndCo.comAlso on Facebook