Social Security Tax Rate
The Social Security tax rate is important for people who depend on making the most of the social security program. There are some are some interesting facts behind this.
The social security program was signed into action by President Franklin D. Roosevelt back in 1935 as part of “the new deal”. The main part of the program is sometimes abbreviated as OASDI (old age, survivors, and disability insurance).
Generally the term social security refers to retirement and the collecting of those benefits by dollars paid by the U.S. social security program. This program is the largest government program in the world and the single greatest expenditure in the federal budget.
As you might know the earliest age where you can claim your benefits is 62. If you start at 62 your benefits will be reduced by 25% for the rest of your life. You can wait until the standard age which is 66 to collect your full benefits. Each year you wait to collect until the age of 70, your benefits will increase, but you’ll need to know how it will be taxed, which is as follows:
Your benefits won’t be automatically taxed, but it depends on your income. Which for this situation will be defined as your adjusted gross income, plus tax free interest, plus half of your social security benefits.
- If your income is less than $25,000 on a single return or less than $32,000 on a joint return then your benefits will be tax free.
- People with incomes in between $25,000 and $34,000 will be taxed on up to 50% of their benefits.
- People with incomes over $34,000 can be taxed on up to 85% of their benefits.
You can choose how to have your benefits taxed. To avoid making quarterly tax payments you may want to ask the social security administration to withhold federal income taxes from your retirement benefits. You can do this with form W-4V.
There are also online services that can set you up with the right plan in a few clicks of the mouse, such as TurboTax Online.
You’ll just be asked for the basic information required to assess the right plan of action and you won’t be obligated to pay until you’re good and ready to. Make the proper arrangements today right from home at TurboTax Online.
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