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.
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.
The survey was conducted from mid-January through April of this year. To read more, go to www.seniorsleague.org.