Individuals with provisional incomes in excess of $25,000 and married couples with provisional incomes in excess of $32,000 could owe taxes on up to 50% of their benefits. Individuals with provisional incomes greater than $34,000 and married couples with provisional incomes greater than $44,000 could owe taxes on up to 85% of their benefits.
But that’s the worst-case scenario. Some people pay taxes on a smaller amount than this, and some manage to avoid benefit taxes entirely.
Many seniors do end up paying some Social Security benefit taxes, though. If you don’t think you can avoid taxes altogether, the next-best thing to do is to estimate how much you might owe in taxes and budget for this in your retirement plan.
If you’re not retired yet, pay attention to any rule changes related to Social Security or benefit taxation, and update your retirement plan accordingly. Keeping a close eye on these changes will ensure you aren’t caught off guard by your tax bills in retirement.
The $16,728 Social Security bonus most retirees completely overlook