US Markets
Home›US Markets›ETFs›Up to 85% of Social Security benefits may be taxable
Up to 85% of Social Security benefits may be taxable
Tax thresholds that determine how much of Social Security is taxable do not adjust for inflation, potentially pushing more retirees into higher taxation bands each year.
SmartAsset and Yahoo Finance LLC warn that retirement planning missteps can be costly, including underestimating taxes on Social Security benefits.
According to the article, up to 85% of Social Security benefits may be taxable depending on a retiree's other income, with the triggers based on fixed thresholds that do not adjust for inflation.
The piece describes a calculation approach, starting with half of Social Security benefits added to adjusted gross income and any tax-free interest, and notes that if the total reaches $25,000 or more for individuals, taxes can apply to up to 50% of benefits, while $34,000 or more can make up to 85% taxable.
It also cautions that withdrawals from tax-deferred accounts such as IRAs and 401(k)s are treated as ordinary income and can compound Social Security taxation, and it highlights Roth conversions as one potential way to shift future withdrawals to tax-free gains.