The SSA website notes:
Beginning in 1984, includes up to one-half of Social Security benefits as taxable income for taxpayers whose adjusted gross income, combined with half their benefits and any tax-exempt interest they may have exceeds $25,000 for a single taxpayer and $32,000 for married taxpayers filing jointly. Benefits received by married taxpayers filing separately are taxable without regard to other income. Appropriates amounts equal to estimated tax liability to the Social Security trust funds.
For the last quarter century we have maintained about these same limits, which means that every year more Americans have to pay taxes on their Social Security benefits. The intention in 1983, when this change was approved by Congress, was to only tax high earners. We can all agree that $32,000 is far from high in today’s economy.
The other issue stems from the limits. Setting $25,000 each for an unmarried couple, and $16,000 each for a married couple, certainly discourages legal matrimony, when you can save income tax on $7,000 by divorcing.
A change to $16,000 per person with no reward for separation should be approved by Democrats everywhere, as well as Republicans concerned about “defense of marriage.”
For those spouses who get benefits from their wife’s or husband’s account, that benefit continues after divorce, so you can get your tax break and the same income as though you were still married.
As the years have passed, the amount of taxation has actually increased, even ignoring wage growth and/or inflation.
Here is the SSA’s rather muddled explanation of this disparity, for what it’s worth:
No one pays federal income tax on more than 85 percent of his or her Social Security benefits based on Internal Revenue Service (IRS) rules. If you:
– file a federal tax return as an “individual” and your combined income* is ◦between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits.
– more than $34,000, up to 85 percent of your benefits may be taxable.
– file a joint return, and you and your spouse have a combined income that is ◦between $32,000 and $44,000, you may have to pay income tax on up to 50 percent of your benefits
– more than $44,000, up to 85 percent of your benefits may be taxable.