Here is how it works:
For a quick computation of your potential tax liability, add one-half of your Social Security benefits to all your other income.
In this calculation, you must also take into account any tax-exempt interest you earned, as well as exclusions from income such as savings bond interest, work-provided adoption benefits or foreign-earned income.
If this amount is greater than the base amount for your filing status, a part of your benefits will be taxable.
Base amounts for figuring possible tax liability on benefits are:
- $25,000 for single, head of household, or qualifying widow or widower with a dependent child.
- $25,000 for married individuals filing separately and who did not live with their spouses at any time during the tax year.
- $32,000 for married couples filing jointly.
- Zero for married persons filing separately who lived together at any time during the tax year.
Notice the base amount for a married couple with substantial "other" income is $32,000 (not 2x$25,000) and $25,000 for a single person. Should boomers retired on SS get a divorce and just live together? It depends on income split and other factors. The point is that a marriage penalty exists for older citizens. It is unfair and should be eliminated. Contact your Senators and Representative....
For those of you not retired and receiving Social Security benefits this may alter when you decide to activate those benefits.