Half of Retirees Report Paying Tax on Social Security Benefits for 2019 According to New Survey by The Senior Citizens League
The number of older taxpayers who find that a portion of their Social Security benefits are taxable tends to grow over time. Up to 85 percent of Social Security benefits can be subject to taxation if an individual has a combined income of $25,000 and married couples filing jointly have a combined income of $32,000. Unlike income brackets that are adjusted for inflation, Social Security benefits subject to taxation have never been adjusted since they became taxable in 1984.
WASHINGTON, June 9, 2020 /PRNewswire-PRWeb/ -- Half of retirees participating in a new survey by The Senior Citizens League (TSCL) say they paid income taxes on a portion of their Social Security benefit income for the 2019 tax year. "There was no change from previous years in the 50 percent of retiree households who report that they pay tax on a portion of their benefits, despite the 2017 tax reform law, says Mary Johnson, a Social Security and Medicare policy analyst for The Senior Citizens League.
The revenues from taxation of benefits are earmarked for funding Social Security and Medicare benefits. "Those revenues take on new importance in 2020, as the coronavirus takes a significant toll on Social Security and Medicare payroll tax revenues with more than 40 million people out of work," Johnson says.
The number of older taxpayers who find that a portion of their Social Security benefits are taxable tends to grow over time. Unlike income brackets that are adjusted for inflation, the income thresholds that subject Social Security benefits to taxation have never been adjusted since Social Security benefits became taxable in 1984. When the law was first passed, less than 10 percent of all Social Security recipients were estimated to have incomes high enough to be affected by the tax on benefits. But today, even retirees with modest incomes can be affected by the tax.
Up to 85 percent of Social Security benefits can be subject to taxation if an individual has a combined income of $25,000 and married couples filing jointly have a combined income of $32,000. Had income thresholds been adjusted for inflation, they would be about $62,902 for individuals and $80,515 for joint filers in 2020. "Combined income" is determined by adding one's adjusted gross income, plus any tax - free interest income, and one - half of Social Security benefits.
According to the 2020 Social Security Trustees report, which does not include estimates of the impact of the coronavirus, Social Security is expected to receive about $853.3 billion in payroll tax revenues this year. "That estimate is higher than it actually will be, since it was based on just a 5 percent unemployment rate," Johnson notes. "Currently the unemployment numbers are roughly four times higher than that," she points out. In addition, the Coronavirus Aid, Relief and Economic Security Act (CARES Act), allows employers to defer the employer portion of payroll taxes in 2020 for up to two years.
The Social Security Trustees further estimate that $38.9 billion in revenues in 2020 would come from the taxation of Social Security benefits. "Yet those revenues are also likely to be lower, impacted by both large numbers of older Americans who lost income from jobs, as well as from lower distributions from retirement accounts that have lost value from last year," Johnson notes. Under the CARES Act, retirees are allowed to completely waive required minimum distributions for 2020 from retirement accounts.
At the same time, new claims for Social Security benefits are growing, as many older workers who have lost jobs file for Social Security benefits earlier than planned. The combined impact increases pressure on Social Security to address solvency issues. A future solvency option supported by more than 72 percent of The Senior Citizens League's survey participants is to apply the Social Security payroll tax to all earnings, instead of just the first $137,700 in wages. The survey was conducted from mid - January through April of this year.
The Senior Citizens League is currently conducting its new 2020 Survey of Senior Costs. To learn more and participate visit http://www.SeniorsLeague.org.
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With 1.2 million supporters, The Senior Citizens League is one of the nation's largest nonpartisan seniors' groups. Its mission is to promote and assist members and supporters, to educate and alert senior citizens about their rights and freedoms as U.S. Citizens, and to protect and defend the benefits senior citizens have earned and paid for. The Senior Citizens League is a proud affiliate of The Retired Enlisted Association. Visit http://www.SeniorsLeague.org for more information.
SOURCE The Senior Citizens League
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