Title

Two Tweaks for the Taxation of Social Security Benefits

Document Type

Article

Publication Date

7-4-2005

ISSN

1048-3306

Publisher

Tax Analysts

Language

en-US

Abstract

The ongoing public discussion of possible changes in the Social Security retirement system has largely ignored a small but significant aspect: The relationship between the retirement benefits paid and the federal income tax. Internal Revenue Code section 86 includes Social Security retirement benefits in the federal income tax base on a three-tier system. Individuals may exclude benefits from gross income, include them at 50 percent, or include them at 85 percent.1 Proposed legislation would repeal the top tier.2 Modification of section 86, to better accord with the proper measurement of income subject to tax, perhaps embodied in a larger "fix" for Social Security, should become part of the legislative agenda.

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