Dear Liz: you wrote in a column On the distribution of retirement plans and their effect on the taxation of social security benefits.
Your example was that if someone earned more than $44,000 in total, their benefits would be taxed at 85%. Does this also apply if you wait until full retirement age to start receiving Social Security?
My husband is also required to start paying the minimum distribution required in 2023. Since we are both still working, will these distributions be taxed differently than the rest of our income, or does it matter if we are working or not?
answer: Taxing Social Security is complicated and often misunderstood, but rest assured that 85% of your benefits will not be lost. If you have income outside of Social Security, whether it comes from work, retirement plan distributions, or other sources of income, up to 85% of your benefits can be taxed at your normal income tax rate.
of previous column He said that Social Security taxes are based on “total income.” This is your adjusted gross income (the number you report on line 11 of your 1040 tax return) plus tax-free interest and half your social security benefits. Single filers with combined income between $25,000 and $34,000 will be required to pay income tax on up to 50% of their benefits, while individual filers with combined incomes over $34,000 will pay up to 85% of their benefits. have to pay taxes. If a couple files jointly, they may have to pay income tax on up to 50% of the benefits if their combined income is between $32,000 for her and $44,000 for her. If her total income exceeds $44,000, she may be required to pay taxes on up to 85% of her benefits. For more information on how social security benefits are taxed, visit his website for government agencies..
Benefits may be taxable regardless of when you started. But the researchers found that if many middle-income earners delayed social security payments and used retirement benefits instead, they paid less taxes overall. For more information on Tax Torpedoes, please visit: Financial Planning Association website.
Your husband’s required minimum distributions are taxable as income unless he makes non-deductible contributions to these retirement plans. If he makes an after-tax donation, a portion of the withdrawal will not be taxed. However, most people received tax breaks on all donations, which means that all withdrawals are taxable.
A tax professional will look into your situation in detail, help you estimate your tax amount, and make sure you have enough withholding to avoid penalties.
Liz Weston is a certified financial planner and US personal finance columnist. nerd wallet. Questions can be directed to 3940 Laurel Canyon, No. 238, Studio City, CA 91604 or by using the “Contact Us” form below. Askweston.com.
