Taxation on Social Security benefits is probably my biggest pet peeve when it comes to the tax code.
Regardless of where you are on the political spectrum, the facts are neither Democrats or Republicans have done anything to make this absurd tax fair. It’s the most regressive tax there is too.
Regressive meaning those on the lower rung of the income picture pay the MOST in taxes.
The reason for this is simple… not being indexed for inflation.
So, in 1984 $16,500 income is the equivalent of $50,000 today. Yet, in 1984 you would have paid NO TAX on your benefits on that amount of income. In 2018 though, you’d be looking at 85% of your benefits being subject to taxation.
Why? Lack of indexing for the Social Security tax brackets. It’s really that simple.
Say you have a moderate IRA distribution and even a pension. Guess what happens to your Social Security benefits? THEY ARE TAXED!
Even worse, each dollar of IRA income will not only be subject to tax but will also make more of your Social Security benefit taxed as well!
Good times.. Good times, indeed.