Some of VP Joe Biden's Social Security is taxed. Is yours?
Saturday, April 19, 2014
Almost 40 million people age 65 or older currently collect Social Security benefits.
Vice President Joe Biden is one of them.
The 71-year-old veep also is among those who pay income tax on at least some of their federal retirement benefits.
Vice President Joe Biden meets with the original six "Rosie the Riveters" who worked in a shipyard during World War II. They, like the veep, are eligible for Social Security benefits. (Office of the Vice President photo.)
That revelation was one of the things we learned with the release of the president's and vice president's 2013 tax returns.
Barack and Michele Obama's latest combined federal and state filing data covered 42 PDF pages. Joe and Jill Biden's jointly filed taxes required 35 PDF pages.
VP's taxable Social Security: With all that information, there obviously are a lot of tax tidbits on which to focus.
But since the United States' second in command is, like millions of others, receiving Social Security, the Bidens' tax return offers a great example of what has to be considered when it comes to taxes on these monthly payments.
Generally, if Social Security is all that you're living on, then you don't have to worry about filing a return. Those payments received by most of the country's elderly are tax-exempt.
If, however, your Social Security like Biden's is supplemented by other income, either earned or unearned, you might owe taxes on some of the benefits.
Basically, the greater your total amount of benefits and other income, the greater the taxable part of your benefits.
Generally, up to 50 percent of your Social Security benefits could be taxable. However, up to 85 percent could be taxable.
Figuring how much to tax: Start with the Form SSA-1099, Social Security Benefit Statement, you got in January. It shows the amount of benefits you received (box 5) in the previous year.
Then add one-half of that benefits amount to any other income -- your adjusted gross income that includes taxable pensions, wages, interest and dividends -- along with any tax-exempt interest income you received.
This sum is your combined income for Social Security taxation purposes. If your combined income is more than a base amount based on your filing status, you're going to owe some tax on your benefits.
Base income, taxable percentages: You use the benefits statement when you complete your federal income tax return to find out if your benefits are subject to tax.
If you file as an individual -- this includes the single, head of household and qualifying widow(er) filing statuses -- and your combined income is between $25,000 and $34,000, you may have to pay taxes on up to 50 percent of your Social Security benefits.
Up to 85 percent of an individual's benefits are taxable when combined income is more than $34,000.
Married couple who file a joint return may have to pay taxes on 50 percent of benefits if spouses have a combined income that is between $32,000 and $44,000.
Joint filers with income of more than $44,000 will see up to 85 percent of your Social Security benefits to be subject to income tax.
And if you're married but you and your spouse file separate 1040s, you probably will pay taxes on your benefits.
Married filing separately filers who did not live with their spouses at any time during the tax year have the same base amount as individual filers.
If, however, spouses lived together at any time during the tax year but just didn't want to file together, the base amount is zilch. That's right, zero dollars.
Final calculations, possible withholding: You figure your taxable Social Security amount using your tax software or the worksheet in the Form 1040 or 1040A instruction book.
The Internal Revenue Service also has an online interactive tool to help folks figure out if their federal retirement benefits are taxable and if so, just how much.
You can check out the Bidens' worksheet (Statement 2 on page 16 of the couple's return) to get an idea of just what the computations entail.
After all the figuring, Joe Biden's $30,552 in Social Security, which ended up on line 20A of the couple's 1040, resulted in a taxable amount (line 20B) of $25,969.
If you think you're going to be in the same situation as the Bidens, you can avoid (or reduce) a tax bill when you file your return by having taxes withheld from your retirement payments.
You can choose to have 7 percent, 10 percent, 15 percent or 25 percent of your total benefit payment withheld. Just complete Form W-4V, Voluntary Withholding Request, and file it with the Social Security Administration.
Additional tax talk: You can read more about the 2013 tax returns of Mr. and Mrs. POTUS and Mr. and Dr. Veep in one of my posts last week at my other tax blog.
Also last week at my other tax blog I looked at ways to get a head start on 2015 tax return filing.
I typically post my additional tax thoughts at Bankrate Taxes Blog each Tuesday and Thursday. Check them out when they go live there or head here to the ol' blog the following weekend for a synopsis.
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