Higher earners could see a big tax hike under a Democratic proposal to boost it Social security and Medicare.
A financial advisor can help you respond to potential changes to tax laws and regulations. Find a credit counselor today.
The proposed legislation – called “Medicare and Social Security Equitable Sharing ActIt would require taxpayers with incomes over $400,000 to pay more into Social Security and Medicare. While most workers pay Social Security taxes on all of their income, neither earnings over the $160,200 limit nor investment income currently contribute.
How can you increase your taxes?
This bill (S.1174), introduced in April by Sen. Sheldon Whitehouse, DRI, aims to increase the solvency of Social Security and Medicare. To do this, taxpayers with incomes over $400,000 would contribute more by:
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Wages, self-employment, and investment income above $400,000 will be subject to taxes.
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Close a tax loophole that allows pass-through companies to circumvent Medicare and other taxes.
Focus on the continuity of social security
The move comes in response to estimates that the Old Age and Survivors Insurance (OASI) trust fund that provides cash for Social Security payments is expected to run out of money as early as 2033. At this point, the Social Security system will only be able to cover 77 percent of the population. % of benefits unless Congress appropriates additional funds for the program.
Along with a move to implement a payroll tax on incomes over $400,000, an option promoted by Republican lawmakers and Some Republican presidential contenders is cutting Social Security benefits for younger Americans.
The Social Security Administration recently presented its analysis of the Medicare and Social Security Fair Participation Act and concluded that it would extend the OASI trust fund by approximately 75 years.
“New analysis from the Social Security Administration, however, shows we can protect this essential program for everyone and improve our crippling tax law — a win in my book,” Whitehouse said in a statement.
Accompanying legislation is being introduced in the House of Representatives by US Rep. Brendan F. Boyle, a Pennsylvania Democrat who added, “This legislation saves Social Security and Medicare for generations to come.”
A 2020 study from the National Institute of Retirement Insurance found that 40% of seniors receive only Social Security income for their retirement, and only 7% of retirees receive income from the traditional “three-legged stool” of Social Security, annuities, and personal savings. Whitehouse noted that Medicare covers the health care costs of more than 60 million beneficiaries, including 20% in savings of less than $15,000.
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Higher earners would have to pay Social Security and Medicare taxes on income above $400,000 under the legislation proposed in the Senate. The legislation also aims to close a tax loophole that Democrats say allows pass-through companies to avoid paying Medicare and Social Security taxes.
Tax strategy tips
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while Asset distribution is the principal tenant of the investment, Asset site It is almost as important. This strategy aims to get the most out of your various accounts by holding tax-efficient assets in taxable accounts and placing the assets that bear the heaviest tax burdens in tax-exempt and tax-deferred accounts.
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