Quote:
Originally Posted by CoachKandSportsguy
Just to provide an example of SS and this rule, I went to the the SS web site and entered the following information for the calculations using the 2024 tax year and rates:
Using a SS income of $44,000 per year, $3,667 per month, which is about the FRA max earnings, for two income couple equals $88,000 annual in SS income.
Then I used 0, ZERO, income for the other information, which is unlikely for anyone, but gives a base idea of the additional deduction value.
The SS taxable income was $6,000 for a married couple filing jointly, using the 2024 85% formula.
So the 2025 deduction changes the formula by adding enough additional deduction to offset the last 15% of taxable SS income, and a small cushion for those retiring later than FRA getting a larger amount.
So, for those with IRA income, or IRA conversions, the impact is helpful but people will still have to pay some amount of income taxes on the IRA/investment income. So actually modeling out the impact on your particular situation will answer your specific situation.. .
I am leaning towards a small reduction in taxes paid on taxable income for most villagers, but better than no change and much better than increased tax rates for the same amount of income.
However, the impact to the treasury income is probably less than the headline due to most people with max FRA benefits will also have retirement plan sourced income.
Good luck out there!
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The problem I'm having is the concept of "reducing taxation of social security income". The increased standard deduction for the next four years (if you quality by not having a higher AGI) is a reduction of taxable income. So if you had taxable income from social security or/and investments and/or pensions and/or a business is it the social security or the other income that would be reduced by up to $12,000.
It eliminates taxes if you only had $12,000 of taxable income. It effectively does lower the bracket your income falls into if you did have tax.
It was estimated that 68% of taxpayers paid no income because their income was too low. This will increase the percentage now not paying.
Because income taxes on social security go into the Social Security tax fund OMB estimated the fund will now be depleted in 2032 - a year earlier than had this provision not been passed. So the BBB just passes the buck down the line!