One of the questions we get quite a lot is in regard to Social Security.
People always want to know if Social Security is considered income.
Well, the short answer is yes, but it's not quite that simple.
It is income, but it's not considered earned income.
So what that means is that you can't use it to determine your eligibility on whether or
not you can fund a traditional or a Roth IRA.
However, it is income that you receive, and it may be subject to federal or state taxes.
The way that's determined is by looking at something called your provisional income.
Now, what your provisional income is is all of your income sources, plus non-taxable interest,
and one-half of your Social Security benefits.
If you're only receiving Social Security, none of that would actually end up being taxed.
However, once you calculate that provisional income if you're a single tax filer and that
number is between $25,000 and $34,000, up to 50 percent of your Social Security income
might be subject to federal taxes.
If it's over $34,000, up to 85 percent of your Social Security might be subject to tax.
If you're a married filer, the numbers are $32,000-$44,0000 to have up to 50 percent
of it taxed or over $44,000 to have up to 85 percent of it taxed.
So it's not quite that simple, but you really want to look into what those numbers are so
that you can find out what the impact to your tax situation is going to be from receiving
your Social Security income.
Now, several states do tax Social Security, but California is not one of them.
There are actually only 13 states that have your Social Security income
subject to state taxation.
I hope that helps.
If you have any other questions or we can help in any other way,
please contact us at Pure Financial.
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