3 Little-Known Ways You Can Lose Your Social Security Benefits
Key Points
The federal government can tax up to 85% of your Social Security benefits.
Eight states currently tax the Social Security benefits of at least some of their seniors.
The Social Security Administration may withhold some of your benefits if you have certain unpaid debts.
You worked hard to earn your Social Security benefits, so it's only natural to want as much of that money to remain with you as possible. But unfortunately, that's not always how it plays out.
Sometimes, your Social Security benefits wind up going to other sources, most notably the government. Here are three reasons why that can happen.
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1. Federal Social Security benefit taxes
The federal government taxes a portion of your Social Security benefits if your provisional income -- adjusted gross income (AGI), plus any nontaxable interest from municipal bonds, and half your annual Social Security benefit -- exceeds certain limits. The following table breaks down what portion of your checks you could owe ordinary income taxes on based on your provisional income and marital status:
|
Marital Status |
0% of Benefits Taxable If Provisional Income Is Below: |
Up to 50% of Benefits Taxable If Provisional Income Is Between: |
Up to 85% of Benefits Taxable If Provisional Income Exceeds: |
|---|---|---|---|
|
Single |
$25,000 |
$25,000 and $34,000 |
$34,000 |
|
Married |
$32,000 |
$32,000 and $44,000 |
$44,000 |
Data source: Social Security Administration.
This doesn't always result in a tax bill, although it can. If that worries you, you can either set money aside for the taxes on your own or request that the Social Security Administration withhold money from your checks up front. If it withholds too much, you'll get the extra back with your tax refund.
2. State Social Security benefit taxes
There are still eight states that tax some of their seniors' Social Security benefits. They are:
- Colorado
- Connecticut
- Minnesota
- Montana
- New Mexico
- Rhode Island
- Utah
- Vermont
Living in one of these states isn't a guarantee that you'll owe anything. Most of them have exceptions for low- to average-income seniors. But it's worth checking with a tax professional in your state to learn if you're at risk of owing these taxes.
3. Garnishment for unpaid debts
The Social Security Administration will garnish some of your benefits for unpaid child support, alimony, or restitution. It can also levy up to 15% of each Social Security payment for unpaid federal taxes.
The best way to avoid this is to stay on top of your other payments or to work out a suitable payment arrangement with the parties you owe. Once you've paid off your debts, your checks should go back to normal.
If you have any questions about why your Social Security benefits seem lower than expected, reach out to the Social Security Administration for clarification.
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