Hello everyone! Welcome once again to Shoeba Español TV, your trusted channel for everything related to Social Security, pensions, disability benefits, and much more. Today we have a topic that interests you greatly: the campaign promise to eliminate taxes on Social Security benefits.
But before we get into the details, it's important to clarify that we're not talking about the FICA taxes we all pay while working. We're talking about the taxes some people must pay on their Social Security benefits, whether for retirement, disability, or surviving spouse benefits.
Did you know that 40-50% of people who receive Social Security benefits don't pay taxes on them? That's because if your income comes solely from Social Security, you most likely don't have to pay taxes. However, for those who do pay, this campaign promise could be a game-changer.
In this video, we'll explain everything you need to know about this proposal, how it could affect the Social Security Trust Fund, and what steps you can take to be informed and prepared. So stay tuned, because this is of interest to you!
What is the Pledge to Eliminate Taxes on Social Security Benefits?
During recent political campaigns, several candidates promised to eliminate taxes on Social Security benefits. This promise has generated a lot of excitement, especially among those who currently pay taxes on their benefits.
But what does this mean exactly? Currently, depending on your total income, between 50% and 85% of your Social Security benefits may be subject to taxes. This means that if you're in the highest bracket, you could be paying taxes on a large portion of your monthly check.
The proposal seeks to eliminate these taxes entirely, which would allow beneficiaries to keep 100% of their payments. However, as we will see later, this measure is not without its challenges.
How Do Social Security Benefits Taxes Work?
To better understand this proposal, it is important to know how taxes on Social Security benefits currently work.
1. Income and Taxation Levels:
If your total income (including Social Security benefits and other sources) is below a certain threshold, you will not pay taxes on your benefits.
If you exceed that threshold, up to 50% of your profits could be subject to taxes.
If your income is even higher, up to 85% of your profits could be taxed.
2. Tax Calculation:
It's not that you pay 50% or 85% of your profits in taxes. Instead, that percentage of your profits is added to your total income and taxed at your tax rate.
3. Current Exemptions:
If your only income comes from Social Security, you probably won't have to pay taxes.
Bills in Progress
There are currently three bills in Congress that seek to eliminate or reduce taxes on Social Security benefits. These bills have been introduced by:
1. Senator Tommy Tuberville (Alabama):
Proposes to amend the Internal Revenue Code of 1986 to eliminate the inclusion of Social Security benefits in gross income.
2. Kentucky Representative:
He introduced a similar bill in the House of Representatives.
3. New York Representative:
Proposes raising the income threshold so that fewer people have to pay taxes on their profits.
These bills must pass through the House of Representatives, the Senate and be signed by the president before becoming law.
Impact on the Social Security Trust Fund
One of the biggest challenges of this proposal is its impact on the Social Security Trust Fund. Currently, benefits taxes contribute about $50 billion annually to the fund. If these taxes are eliminated, the government would have to find another way to make up for this loss of revenue.
What would happen to the Trust Fund?
Faster Exhaustion:
Without the profit taxes, the trust fund could be depleted faster than anticipated. Currently, the fund is estimated to be depleted in 2033 or 2034, resulting in across-the-board benefit cuts.
Possible Solutions:
To avoid this scenario, the government could increase FICA taxes, reduce other programs, or find new sources of revenue.
Who would benefit from this measure?
1. Mixed Income Individuals:
Those who receive Social Security benefits and have other income (such as pensions or investments) would benefit the most, since they currently pay taxes on a portion of their benefits.
2. Low Income People:
Although many low-income earners no longer pay taxes on their benefits, this measure would give them greater financial security.
3. Surviving Spouses and Disability Beneficiaries:
These groups could also benefit, depending on their total income.
Tips for Social Security Recipients
1. Check if you pay taxes:
Use the tool on the IRS website to calculate whether your benefits are taxable.
2. Plan your Finances:
If this measure passes, be sure to adjust your budget to make the most of your benefits.
3. Find out about the Bills:
Keep an eye on the progress of these bills and contact your representatives to voice your opinion.
Conclusion: A Promise with Great Implications
Dear friends of Shoeba Español TV, the promise to eliminate taxes on Social Security benefits is exciting news, but it also comes with great challenges. While we wait to see how this proposal plays out in Congress, it is important that we stay informed and prepared for any changes.
Don't forget to share this video with your friends and family who are also Social Security beneficiaries. Subscribe to our channel, activate the bell and leave us your comments if you have any questions or want us to talk about another topic.
Until next time, and don't miss out on your money!
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