Student Loan Interest and Taxes
Student Loan Interest and Taxes The federal government recognizes the financial burden that higher education and related student loans can place on borrowers. To address this, the IRS offers certain…
October 25th, 2021
On October 13, The Social Security Administration released its 2022 fact sheet. Let’s look at some of the important provisions to consider when planning with our clients.
The tax rate, including Medicare, remains at 7.65% for employees and 15.30% for self-employed taxpayers. It is worth mentioning that the additional .9% Medicare tax implemented back in 2013 still applies when an individual earns more than $200,000 or $250,000 for married couples who file a joint return.
The maximum amount of earnings subject to Social Security Tax in 2022 increases to $147,000 from $142,800 in 2021. Remember that Medicare tax is unlimited, therefore it never is phased out on a taxpayer’s earned income.
Thinking of taking benefits before full retirement age (FRA)? For those of you out there (like myself) who will hit the magical age 62 in 2022, we can take benefits beginning next year, but be advised we are below the FRA, which is age 67 if you were born in 1960 or later.
Let’s consider a couple of planning ideas within the statements I just made. Note that I gave you not just the annual limit to earnings when you are under FRA, but also the monthly amount. It’s important to be aware that adjustments to your benefits are determined by your monthly income. If you are taking your benefits early and were perhaps thinking of working next year just during tax season and are convinced you can make $19,560 and not lose benefits for that first four months of the year, you would be wrong since the monthly limit of $1,630 per month applies. A strategy to employ, assuming you are an employee and lucky enough not to own your practice any longer, is to have the money you earned spread out over the course of the year so as not to exceed the $1,630 per month limit.
Another point I want to make is that when you have to pay back benefits because you earned too much during your years prior to FRA, when you do reach FRA (again age 67 for those of us born in 1960 and after), Social Security will recalculate your FRA benefits for those amounts you paid back. It would appear then that taking your benefits early is not a completely ridiculous consideration for those of us who are still working.
Age with grace and style my friends and think young thoughts…after all, we are only as old as we feel or act…
By Tom O’Saben EA
Disclaimer: The information referenced in Tax School’s blog is accurate at the date of publication. You may contact firstname.lastname@example.org if you have more up-to-date, supported information and we will create an addendum.
University of Illinois Tax School is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information in this site is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information. This blog and the information contained herein does not constitute tax client advice.
Join 1,400 of your colleagues and get notified each time a new post is added.