In 1983, Congress approved recommendations to tax the benefits of some higher-income Social Security beneficiaries.  Since 1984, up to 50% of SSA and Railroad Retirement Tier 1 benefits were taxable for those whose provisional income (AGI plus other tax-exempt income, including half of SSA and Railroad Retirement Tier 1 benefits) exceeded $25,000 ($32,000 for married couples).  In 1993, the share of those benefits taxable increased up to 85% under the Omnibus Budget Reconciliation Act (OBRA) for those whose provisional income exceeded $34,000 ($44,000 for married couples).

The Congressional Budget Office (CBO) projects that 49% of SS beneficiaries in 2014 will subject to taxation of their benefits.  The Congressional Research Service released a recent report, which, in part, showed that same figure was 39% in 2008, 34% in 2000, and 26% in 1998.

See “CRS Updates Report on Taxation of Social Security Benefits,” 2014 TNT 151-21 (Aug. 6, 2014).

Posted by Morgan Yuan, Esq., Associate Editor, Wealth Strategies Journal.