TAXING SOCIAL SECURITY

 

Moron Trump now proposes eliminating federal income tax on Social Security (and, I assume, Railroad Retirement) benefits. 

FYI – the taxability of up to 50% of Social Security benefits (and Social Security equivalent Railroad Retirement benefits) was introduced under Reagan and began in 1984. The taxability was increased to up to 85% in the Omnibus Budget Reconciliation Act in 1993.

Like his proposal to eliminate tax on tips, this is just another attempt to buy votes.

I do believe that the current method of determining taxable Social Security is wrong.  Under the current method whether your Social Security, or Railroad Retirement, benefits are taxed depends on the amount of the other income reported on your 1040-SR – and this includes otherwise tax-exempt interest from investments in municipal bonds and municipal bond funds. For every additional $100 of income, you could be taxed on $185.  So, for a person in the 22% bracket the additional income could be taxed at 41% - more than the current maximum 37% bracket.

Here is how I think Social Security should be taxed – from my book THE TAX CODE MUST BE DESTROYED -

“Social Security and equivalent Railroad Retirement benefits would be taxed the same as regular employer pensions are currently taxed.  There would be no special calculation, and the taxable benefit would no longer be affected by increases or decreases in other items of income.  Taxpayer employee contributions would be recovered by amortizing them over the taxpayer’s life using the, what else, ‘Simplified Method’ to determine the taxable amount of the benefits received.”  

Your thoughts?

TTFN

TAX REFORM PROPOSALS - TAXING SOCIAL SECURITY

 

The US Tax Code is full of inequities and basic “unfairness”.  One example of this “unfairness” is the method for taxing Social Security and Social Security equivalent Railroad Retirement benefits.

 

When I first started out in the business Social Security was not taxed.  It first became taxable under Reagan in 1984.  Originally only up to 50% of benefits were taxed – the thinking being half of the contributions to Social Security are made by employees and half by employers, so only the employer half would be taxed.  This maximum was later raised to 85% so the “earnings” on Social Security benefits would also be taxed.    

 

Because of the way Social Security and equivalent Railroad Retirement benefits are currently taxed it is very possible that for every additional $1.00 of income you pay tax on $1.85.  So, income that falls within the new 22% bracket can be effectively taxed at 40.7% - almost 4% above the current top tax rate.

 

Social Security and Railroad Retirement benefits are taxed based on the extent of your other taxable income and tax-exempt interest.  You could pay tax on up to 50% or 85% of the gross benefits.  So, an additional $100 of dividends, or interest or capital gains or W-2 income can cause an additional $85 of your benefits to be taxed, so the $100 increase causes your AGI to increase by $185.

 

Because taxable Social Security and Railroad Retirement benefits increase AGI, increases could also reduce tax deductions and credits that are affected by AGI – increasing the effective tax rate of the increase.  The increased AGI can, for example, result in some qualified dividends and long-term capital gains being effectively taxed at more than the “advertised” 0% or 15% rate.

 

The Solution – tax Social Security benefits the same as any other pension with “after-tax” employee contributions, using the “Simplified Method”.  The taxable portion of the benefit would be calculated by SSA and reported as such on the SSA-1099 and RRB-1099, similar to the way partially taxable pension income is reported on the Form 1099-R.   

 

Your thoughts?

 

TTFN

THE 2021 SOCIAL SECURITY INCREASES

 

The Social Security Administration has announced the Cost-of-Living Adjustments (COLAs) for calendar year 2021.

“Social Security and Supplemental Security Income (SSI) benefits for approximately 70 million Americans will increase 1.3 percent in 2021.

The 1.3 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 64 million Social Security beneficiaries in January 2021. Increased payments to more than 8 million SSI beneficiaries will begin on December 31, 2020. (Note: some people receive both Social Security and SSI benefits).”

And

“The maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $142,800.

The  earnings limit for workers who are younger than "full" retirement age (see Full Retirement Age Chart) will increase to $18,960. (We deduct $1 from benefits for each $2 earned over $18,960.)

The earnings limit for people reaching their “full” retirement age in 2021 will increase to $50,520. (We deduct $1 from benefits for each $3 earned over $50,520 until the month the worker turns “full” retirement age.)

There is no limit on earnings for workers who are "full" retirement age or older for the entire year.”

 

Click here for the Fact Sheet of 2021 Social Security Changes.

 

The increase of the Social Security tax earnings threshold to $142,800 means the maximum amount of Social Security tax withholding for 2021 is $8,853.60.  And the maximum Social Security component of the self-employment tax for 2021 is $17,707.20.  

 

TTFN

QUESTIONS FROM A CLIENT

A client recently emailed me some questions that I think are often asked of tax preparers, especially now with the changes made by the GOP Tax Act.  The answer to these questions, and the debunking of some common misconceptions the answer includes, are important to understand.

Robert -

1. Just wanted to ask you how do you report taxes at end of year on a 1099?  I imagine in this case you report less than if your employer was reporting on a W-2. Please explain what is advantage AND disadvantage?

2. I hear is that when you are working on your own or providing home care you can report whatever you want, but I still want to accumulate for my Social Security.  Am sure in this case you don’t have to pay city taxes or Medicare, etc.

Madame X

My response:

Madame X -

1. Income from a Form 1099 is reported based on the source of the income.  If it is a Form 1099-MISC reporting “non-employee compensation” it is reported on a Schedule C or C-EZ of Form 1040, with deductions for directly related out of pocket expenses allowed.  The net amount is subject to federal and state, and if applicable city, income tax and federal “self-employment” tax, which is the equivalent of both halves of Social Security and Medicare.  A new special tax deduction of 20% of the net income may be allowed.  However, this new deduction does not reduce net income subject to the self-employment tax.

The amount that is reported by the payee on a Form 1099-MISC for non-employee compensation is the same as the amount of gross wages reported for an employee – the gross amount of the payment to you for services provided.  Less income may be actually subject to tax because of the deduction of direct out of pocket expenses related to earning the income.

The advantage of receiving income as a “sub-contractor” on a Form 1099-MISC vs receiving income as an employee on W-2 is the availability of the deduction for directly related out of pocket expenses and the new 20% deduction for “pass-through” business income.  The disadvantage is that you pay both halves of the Social Security and Medicare tax – as an employee you pay half and your employer pays half - although the amount of income on which the self-employment tax is paid may be less than the gross wages reported on a W-2 that are subject to these payroll taxes.

2. It is NOT true that if you are working on your own you can report “whatever you want”.  By law you MUST report WHATEVER YOU RECEIVE in full, whether or not you actually receive a Form 1099-MISC. 

A person being paid for providing home care is a “household employee” of the person who is being cared for.  The person being cared for would need to withhold income and Social Security and Medicare taxes, as any other employer would, and issue the person providing the home care a Form W-2.

As a self-employed person, you would continue to pay into Social Security via the “self-employment tax” and your net income would count toward the determination of Social Security benefits.

RDF

Do you have any questions?

TTFN

NOBODY EVER SAID TAXES WERE FAIR

Tax reform discussions rarely touch on the many inequities and basic “unfairness” in the US Tax Code.

Here are three examples of “unfairness” that still remain in the US Tax Code.  They were not addressed in the GOP Tax Act but should be in future tax reform legislation.  I have posted separately about these in the past – but here they are together in one post.

As an aside, many of the inequities in the pre-TCJA code involved or were made worse by the dreaded Alternative Minimum Tax.  But the Act makes the AMT no longer an issue in most cases.

(1) Taxation of Social Security and Railroad Retirement Benefits

As I am often telling clients each filing season, because of the way Social Security and Railroad Retirement benefits are taxed it is very possible that for every additional $1.00 of income you pay tax on $1.85.  So, income that falls within the new 22% bracket can be effectively taxed at 40.7% - almost 4% above the current top tax rate.

Social Security and Railroad Retirement benefits are taxed based on the extent of your other taxable income and tax-exempt interest.  You could pay tax on up to 50% or 85% of the gross benefits.  So, an additional $100 of dividends, or interest or capital gains or W-2 income can cause an additional $85 of your benefits to be taxed, so the $100 increase causes your AGI to increase by $185.

Because taxable Social Security and Railroad Retirement benefits increase AGI, increases could also reduce tax deductions and credits that are affected by AGI – increasing the effective tax rate of the increase.

As a side bit of unfairness, because increased SS or RR benefits increase AGI, the increase can potentially result in some qualified dividends and long-term capital gains, which have caused the increase in taxable SS or RR, being effectively taxed at more than the “advertised” 0% or 15% rate.

The Solution – tax Social Security benefits the same as any other pension with “after-tax” employee contributions, using the “Simplified Method”.  The taxable portion of the benefit would be calculated by SSA and reported as such on the SSA-1099 and RRB-1099, similar to the way partially taxable pension income is reported on the Form 1099-R.  Or perhaps treat Social Security and Railroad Retirement like a “ROTH” investment, as employee contributions are not deductible, and do not tax benefits at all.  These benefits were not taxed at all until 1984.

(2) Taxation of Gambling Winnings

Gross gambling winnings, reported on Form W-2G, are generally reported in full as income on Line 21 of Page 1 of the Form 1040, increasing AGI, while gambling losses, to the extent of reported winnings, are deductible as an Itemized Deduction.  So, it is possible for a taxpayer to pay additional federal income tax on net gambling losses.

John Q Taxpayer buys $10 in state lottery tickets each and every week.  One week he hits for $500.  He has no other gambling activity for the year.  He must report the $500 win in full as taxable income and, if he receives Social Security, potentially increase taxable SS benefits by $425.  So, his AGI could increase by $945.  If he is unable to itemize due to the increased Standard Deduction he does not get a tax benefit for his losses.  So, if he is in the 22% bracket he would pay from $110 up to $204 in federal income tax on $20 in gambling losses.

If the $500 win does cause his taxable SS benefits to increase by $425 but he can itemize and deduct $500 in losses on Schedule A he is still paying $94 in income tax in the 22% bracket.  And if he can deduct medical expenses the net taxable income is increased by $69 because the additional income reduces the allowable medical deduction.

Thankfully Tax Court decisions and IRS regulation revisions have corrected this problem for some casino gambling – but not for all gambling situations.

I have no problem with limiting the deduction for gambling losses to gambling winnings – just with where and how the losses are deducted.

The Solution – obviously, report only net gambling winnings, after deducting losses, but not less than 0, as income on Page 1 of Form 1040, as is done on the NJ-1040.

(3) The Marriage Tax Penalty

The Marriage Penalty manifests itself in many ways in the US Tax Code.  The result is that two married individuals, each with their own separate sources of income (i.e. W-2 or pension income), pay more income tax by filing as a married couple then by filing two separate returns as unmarried Single taxpayers merely living together.

Filing as Married Filing Separately does not always remove or reduce the Marriage Penalty.  Some deductions are “per return” and not “per spouse”.  And many tax benefits allowed on a Single return are reduced or just plain not allowed on a Married Filing Separate return – such as the Credit for Child and Dependent Care Expenses, the Earned Income Credit, the Credit for the Elderly or Disabled, or the HOPE or Lifetime Learning Education Credit.  A couple filing separately can pay more tax than if they filed a joint return.

The maximum amount of combined income or sales and property taxes that can be deducted on Schedule A is $10,000 – but only $5,000 if Married Filing Separate.  Two unmarried individuals living together can each deduct $10,000, for a total of $20,000.  If the 22% bracket applies, the marriage tax penalty for this item alone is up to $2,200. 

A married couple can deduct up to $3,000 in net capital losses per year – but only $1,500 if Married Filing Separate.  Two unmarried individuals each with capital losses for the year, or carried forward, in excess of $3,000 can each deduct $3,000, for a total of $6,000.  You do the math.

There is also a Marriage Tax Benefit – for households with only one earning spouse.  Because of the doubling of many tax benefits on a joint return the couple pays less tax than the earning spouse would pay on a Single return (if one spouse has no taxable income and was not married there is no need to file a return and the Standard Deduction is not claimed if filing as single – but twice the Standard Deduction is allowed on a joint return reporting the same total income; granted the earning taxpayer could claim the non-earning taxpayer as a dependent on the one Single return and possibly get additional tax benefits – but not as much as Married Filing Joint).

In my opinion there should be neither a tax penalty or tax benefit for marriage.

The solution – allow a two-income married couple to file separately as if they were each filing a Single return, with all the benefits and the same tax table and rate schedule as a Single filer.  I deal with this in more detail in “The Tax Code Must Be Destroyed”.  This at least does away with the marriage penalty.  I am not quite sure how to remove the marriage benefit, or if it actually should be removed.

There are many other inequities in the current US Tax Code.  I will discuss more in future posts.

Do you have any examples to share.

TTFN

STARTING THE NEW YEAR OFF RIGHT

I am in the process of proofing the January 2018 issue of ROBERT D FLACH’S 1040 INSIGHTS and getting ready to “go to press”.

This issue discusses –

* “year-beginning” tax moves to make,

* information returns that will begin to appear in the mail in January,

* the changes to the 1040 that will affect most taxpayers that are in the new Tax Cuts and Jobs Act,

* using a “box” or online service to prepare their tax returns, and

* the Social Security changes for 2018.  

You can order a copy of this issue for only $2.00 – a special discounted price for this issue.  It will be sent to you as a pdf email attachment. 

Send your check or money order for $2.00, payable to Taxes and Accounting, Inc, and your email address to –

TAXES AND ACCOUNTING, INC

FOBERT D FLACH’S 1040 INSIGHTS

POST OFFICE BOX A

HAWLEY PA 18428

For information on subscribing to this newsletter click here.

TTFN

SOME NEWS AND A REMINDER

(1) The Social Security Administration announced on Monday that it has revised the 2018 taxable wage base –

“The new amount for 2018, based on updated wage data reported to Social Security, is $128,400.”

In a press release the SSA explained -

“Based on the wage data Social Security had at the time of the October 13, 2017, announcement, the maximum amount of earnings subject to the Social Security tax (taxable maximum) was to increase to $128,700 in 2018, from $127,200 in 2017.”

And -

“This lower taxable maximum amount is due to corrected W2s provided to Social Security in late October 2017 by a national payroll service provider. Approximately 500,000 corrections for W2s from 2016 resulted in changes for three items based on the national average wage: the 2018 taxable maximum, primary insurance amount bend points--figures used in the computation of Social Security benefits--and family maximum bend points. No other items based on national average wages were affected.

The change to the taxable maximum does not take effect until January 2018, and the updated bend points in the benefit computation only apply to people who initially become eligible for Social Security benefits in calendar year 2018. This does not affect current beneficiaries.”

As a result of this revision, the maximum withholding for Social Security tax in 2018 is now $7,960.80.  And for 2018 the self-employment tax imposed on self-employed people is 12.4% Social Security tax on the first $128,400 of self-employment income, for a maximum of $15,921.60, plus 2.9% Medicare tax on the all self-employment income. 

(2) I recently received the following email reminder from the New Jersey Division of Taxation.

“Starting January 1, 2018, the Sales and Use Tax rate will decrease from 6.875 to 6.625%.  

Please prepare to update your records accordingly. The new tax rates will be:

* Atlantic City Luxury Tax-

12.625% (9% Atlantic City Luxury Tax and 3.625% New Jersey Sales and Use Tax for sales subject to both taxes ‒ other than alcoholic beverages by the drink);

9.625% (3% Atlantic City Luxury Tax and 6.625% New Jersey Sales and Use Tax for alcoholic beverages that are sold by the drink in Atlantic City);

* Boat and Other Vessels Sales Tax ‒ 3.3125% (50% reduced rate);

* Cape May County Tourism Tax ‒ 8.625% (6.625% New Jersey Sales and Use Tax and 2% Tourism Tax for Wildwood, Wildwood Crest, and North Wildwood). This rate is in addition to the 1.85% Tourism Assessment and the 3.15% State Occupancy Fee on hotel occupancies;

* New Jersey Sales and Use Tax ‒ 6.625%;

* Salem County Sales Tax ‒ 3.3125% (50% reduced rate);

* Urban Enterprise Zone Sales Tax ‒ 3.3125% (50% reduced rate).

If you have any questions:

* Visit here for more information about New Jersey Sales and Use Tax or

* Call the Division of Taxation's Customer Service Center at 609-292-6400. We're available Monday, 8:30 a.m. to 5:30 p.m. and Tuesday through Friday, 8:30 a.m. to 4:30 p.m., except State holidays.”

TTFN

TAXES AIN'T FAIR!

Tax reform has become a hot political topic.  Reduce taxes on the middle class, or increase taxes on the “wealthy” simply because they can afford it.

 

I see a great need for substantive tax reform not to reduce, or for some taxpayers increase, the actual amount of taxes paid – but to simplify the Tax Code and make it more fair.

 

Nobody ever said taxes are fair.  There are many inequities in the US Tax Code, some purposeful and some unintended.

 

Among the biggest inequities concerns how the Code treats some aspects of “gross income” and expenses related to generating this income.  I speak specifically of the taxation of gambling winnings and legal settlements.

 

If you have gambling winnings you must report, in most cases (how to report some winnings is a topic for another post), the gross winnings as income on Page 1 of the Form 1040.  This is the amount that is reported on Form W-2G.  So gross winnings are included in Adjusted Gross Income (AGI).  But gambling losses, to the extent of winnings reported, are deducted as a Miscellaneous Deduction on Schedule A if you are able to itemize (although not subject to the 2% of AGI exclusion).

 

Similarly, the gross amount of legal settlements, except for settlements for physical injuries or sickness (any damages or settlement you receive to compensate you for your medical expenses, lost wages, and pain, suffering, and emotional distress is not included in income), is included as income on Page 1 of Form 1040.  The legal fees, often as much as 1/3 of the settlement, and other related are also deducted as a Miscellaneous Deduction on Schedule A if you are able to itemize (in this case the deduction is subject to the 2% of AGI exclusion).

 

A taxpayer can have $5,000 in gross winnings from gambling activities for the year, but $6,000 in gambling losses.  So, the taxpayer’s gambling activity for the year has resulted in a loss.  The taxpayer ended up with no money “in pocket’ from gambling. 

 

If the taxpayer is able to itemize without taking into effect the allowed gambling losses, the Schedule A deduction for $5,000 in gambling losses results in net taxable income of 0 – so, in effect but not necessarily in reality, he/she does not pay federal income tax on the winnings.  But if the taxpayer is not able to itemize, even with the gambling loss deduction, or if he/she is only able to itemize because of the gambling loss deduction (without the deduction his itemizable deductions do not exceed the applicable Standard Deduction), he/she will be paying federal income tax on up to $5,000 of income that was not actually received – in the 25% tax bracket $0 in net gambling income could cost the taxpayer at least $1,250.

 

Similarly, with a taxable legal settlement, the need to deduct legal fees as a miscellaneous itemized deduction subject to the 2% of AGI exclusion could result in federal income tax being paid on more than the actual “in pocket” amount.

 

Of course, a large portion of the inequity comes from the fact that various items of income are increased and deductions and credits are reduced or eliminated based on one’s AGI.  And the fact that most itemized miscellaneous deductions are not allowed in calculating the dreaded Alternative Minimum Tax (AMT).

 

While a taxpayer may be able to wipe out gambling winnings with fully deductible gambling losses, the fact that gross winnings are included in AGI could result in more of the taxpayer’s Social Security or Railroad Retirement benefits (the amount of benefits taxed is determined by a formula that is based on AGI) being taxed – many frequent gamblers in the casinos of Atlantic City for example are senior citizens – or could reduce or totally eliminate allowable tax deductions or credits.  So again, the taxpayer is in reality paying federal income tax on $0 in net income.

 

The same is possible with a taxable legal settlement – except for settlements for discrimination claims, the related legal fees allowed as an “adjustment to income” which reduces AGI.  And, while there may be no excess tax under “regular” income tax rules there may be AMT.  Allowable gambling losses from Schedule A are fully deductible in calculating the dreaded AMT – but because legal fees are a miscellaneous deduction subject to the 2% of AGI limitation they are not deductible in calculating AMT.  So, tax is paid on the full amount of the gross settlement at a flat 26% or 28%.  When adding the federal and state tax to the legal fees the taxpayer may end up with only 1/3 or less of the actual award “in pocket”.

 

And while in many cases net and not gross gambling winnings are taxed under AMT, the fact that gross winnings are included in AGI, and therefore Alternative Minimum Taxable Income (AMTI), could reduce the AMT exemption, resulting in AMT tax on gambling winnings even if the net is 0.  $5,000 in gross winnings can reduce the AMT exemption by $1,250 and result in an additional $325 or $350 in AMT.

 

The AMT issue would go away if tax legislation repeals this tax.  And changing the way Social Security and Railroad Retirement benefits are taxed and no longer allowing AMT to affect tax deductions and credits would also help to remove inequities.  But the best way to do away with the unfairness of the tax treatment of these two types of income would be allowing taxpayers to net gambling losses against gambling wins (still not allowing the deduction of more losses than wins) and net legal fees against gross settlements – either directly by entering the net amount on Page 1 or by allowing the deductions as an adjustment to income reducing AGI – would certainly fix the problem.

 

So, what do you think?

 

FYI – I will post on other inequities in the current Tax Code in future posts.

 

TTFN

 

 

 

 

 

 

THIS JUST IN!

An important item that I missed in this morning’s BUZZ post.

According to the Social Security Administration (highlights are mine) -

“Monthly Social Security and Supplemental Security Income (SSI) benefits for more than 66 million Americans will increase 2.0 percent in 2018, the Social Security Administration announced today.”

And -

“ . . . the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $128,700 from $127,200.”

Click here for a Fact Sheet on the 2018 changes.


























 

THIS JUST IN – 2017 SOCIAL SECURITY INCREASES

 The following has just been released -

The 2017 Social Security wage base for computing the Social Security component of the FICA tax is 127,200, up from $118,500.  The maximum withholding for Social Security tax for 2017 is $7,886.40.

The self-employment tax imposed on self-employed people is 12.4% Social Security tax on the first $127,200 of self-employment income, for a maximum of $15,772.80, plus 2.90% Medicare tax on the all self-employment income. 

Click here for a chart of historical contribution and benefit bases from 1937 through 2017.

The Social Security Administration has also announced -

“Monthly Social Security and Supplemental Security Income (SSI) benefits for more than 65 million Americans will increase 0.3 percent in 2017, the Social Security Administration announced today.

The 0.3 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 60 million Social Security beneficiaries in January 2017. Increased payments to more than 8 million SSI beneficiaries will begin on December 30, 2016. The Social Security Act ties the annual COLA to the increase in the Consumer Price Index as determined by the Department of Labor’s Bureau of Labor Statistics.”

TTFN

 

NO COST OF LIVING INCREASE FOR SOCIAL SECURITY RECIPIENTS FOR 2016

The Social Security Administration has announced that the "Law Does Not Provide for a Social Security Cost-of-Living Adjustment for 2016" -

 

“With consumer prices down over the past year, monthly Social Security and Supplemental Security Income (SSI) benefits for nearly 65 million Americans will not automatically increase in 2016.

The Social Security Act provides for an automatic increase in Social Security and SSI benefits if there is an increase in inflation as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).  The period of consideration includes the third quarter of the last year a cost-of-living adjustment (COLA) was made to the third quarter of the current year.  As determined by the Bureau of Labor Statistics, there was no increase in the CPI-W from the third quarter of 2014 to the third quarter of 2015.  Therefore, under existing law, there can be no COLA in 2016.”

This means that there will be no cost of living increase in the checks for Social Security beneficiaries for 2016. 

It also means that there will be no change in the maximum amount of earnings subject to the Social Security component of the FICA tax.  The maximum amount of wages subject to the 6.2% Social Security tax for 2016 remains at $ 118,500.  The maximum Social Security tax withholding for 2016 will remain $7,347, and the maximum Social Security component of self-employment tax for 2016 will remain $14,694. 

Also unchanged is the earnings limitations for those electing to begin receiving their benefits before full retirement age, and for the first year that a recipient reaches full retirement age –

Retirement Earnings Test Exempt Amounts:	2015	2016
Under full retirement age NOTE: One dollar in benefits will be withheld for every $2 in earnings above the limit.	$15,720/yr. ($1,310/mo.)	$15,720/yr. ($1,310/mo.)
The year an individual reaches full retirement age NOTE: Applies only to earnings for months prior to attaining full retirement age. One dollar in benefits will be withheld for every $3 in earnings above the limit. There is no limit on earnings beginning the month an individual attains full retirement age.	$41,880/yr. ($3,490/mo.)	$41,880/yr. ($3,490/mo.)

There is a change in the maximum Social Security benefit – a decrease.  The maximum benefit for a worker retiring at full retirement age was $2,663 per month for 2015, but will be $2,639 per month for 2016.  A decrease in full maximum benefits occurs when there is no COLA, but there is an increase in the national average wage index.

As for Medicare Part B premiums -

“The Department of Health and Human Services has not yet announced Medicare premium changes for 2016.  Should there be an increase in the Medicare Part B premium, the law contains a “hold harmless” provision that protects approximately 70 percent of Social Security beneficiaries from paying a higher Part B premium, in order to avoid reducing their net Social Security benefit.”

So the premium will remain the same for 2016 for most Social Security beneficiaries.

Click here for a Fact Sheet on “2016 Social Security Changes”.

TTFN