Welcome to “Ask Stacy,” a short video feature answering money questions submitted by readers and viewers.
Today’s question is about Social Security; specifically, how the recent massive changes in tax laws will affect current and future recipients.
Watch the following video and you’ll pick up some valuable info. Or, if you prefer, scroll down to read the full transcript and find out what I said.
You also can learn how to send in a question of your own below.
For more information, check out “12 Ways to Maximize Your Social Security Checks” and “5 Ways to Avoid Paying Taxes on Your Social Security Benefits.” You can also go to the search at the top of this page, put in the words “Social Security” and find plenty of information on just about everything relating to this topic.
If you’d like some inexpensive help to make sure you’re going to get the maximum benefit when the time comes, see our Maximize Your Social Security page. And if you need anything from a better credit card to help with debt, be sure and visit our Solutions Center.
Got a question of your own to ask? Scroll down past the transcript.
Don’t want to watch? Here’s what I said in the video
Hi, everyone, and welcome to the one-minute money manager. I’m your host, Stacy Johnson. Here’s how it works: You ask a money question. If I can’t answer it in less than a minute, you probably didn’t need to know it.
This answer is brought to you by MoneyTalksNews.com, serving up the best in personal finance news and advice since 1991.
Let’s get right to today’s question. It comes to us from Rich:
“How will the new tax cut impact Social Security payments, if at all?”
Here are three things you need to know.
First thing: The new tax law does not directly impact Social Security.
Having said that, it is true that many Americans already pay taxes on their Social Security. If you want to know if you’re one of them, here’s what to do: Take your adjusted gross income — you’ll find it at the bottom of the first page of your tax form — and add any tax-free interest you’ve received during the year. To that, add half your total Social Security income. If the result is more than $25,000 if you’re single or $32,000 if you’re filing a joint return, you’ll be paying tax on at least some of your Social Security, and perhaps up to 85 percent of it.
This is nothing new, however, and has nothing to do with the new tax law.
Second thing: There are some changes, courtesy of the new tax law, that will affect all of us, including those of us not on Social Security. They include losing your personal exemptions, which is bad. On the other hand, the standard deduction nearly doubled, which is good. Some deductions were eliminated entirely and others, like sales and property taxes, are now limited. That’s bad.
In short, it’s hard to know whether these changes will be good or bad for you without going through your personal tax picture. Some people, including those who are retired, are going to pay more, some less.
Third thing: The new tax law had a major negative side effect. It creates monster budget deficits. Over the next 10 years, our government is expected to spend $1.5 trillion more than it takes in. Because of these exploding deficits, politicians will likely look for ways to raise extra money. One of those ways may be to cut into Medicare, Medicaid and Social Security.
This hasn’t happened yet, and there’s no guarantee it will. But a lot of people are expecting attacks on entitlements in order to help ease budget deficits. So keep an eye out.
Want more information? Go to MoneyTalksNews.com and do a search for Social Security.
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About me
I founded Money Talks News in 1991. I’m a CPA, and have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.
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