Many people don't realize that Social Security benefits can be taxable. But exactly how much you'll pay in tax isn't quite as simple as it looks at first glance.
In the following video from our Social Security Q&A series, Dan Caplinger, The Motley Fool's director of investment planning, answers a question from Fool reader Andrea, who asks whether she'll lose 85% of her Social Security benefits to tax because she has a relatively high income. Dan notes that the biggest confusion about Social Security taxation is that you don't pay a tax rate of 85%; rather, up to 85% of your benefits can be added to your taxable income and taxed at whatever your prevailing rate is. But Dan also points out that Andrea is right to consider waiting to take Social Security until her income is lower, although there's no age limit at which Social Security benefits don't get taxed if the other conditions are met.
Have general questions about Social Security? Email them to SocialSecurity@fool.com, and they might be the subject of a future video!
Dan Caplinger and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.