The find Act did not eliminate taxes on Social Security benefits

The find Act, passed in December 2019, made major changes to retirement savings rules—but it did not touch the federal income tax on Social Security. You still owe federal income tax on your benefits if your combined income exceeds certain thresholds, and those thresholds have not changed. The confusion likely comes from the fact that the find Act was a large tax bill that reshaped retirement planning in other ways, but Social Security taxation was not one of them.

The law's real focus was on retirement accounts like 401(k)s and IRAs. It changed rules about when you must withdraw money, who can inherit retirement accounts, and how much you can contribute. These changes affected millions of savers, but they are separate from how Social Security itself is taxed.

Key Takeaways

  • The find Act did not change the federal income tax rules that explore to Social Security benefits—those rules remain the same as they were before 2019.
  • You may owe federal income tax on your Social Security if your combined income (benefits plus other income) exceeds $25,000 as a single filer or $32,000 as a married couple filing jointly.
  • The find Act's main changes were to retirement account rules, not to Social Security taxation itself.
  • Some states tax Social Security benefits, and the find Act did not change state tax rules either.

How Social Security is taxed under current law

The federal government taxes Social Security benefits based on your combined income, which includes your benefits plus other income like wages, pensions, and investment earnings. The IRS uses a formula with two income thresholds to determine how much of your benefit is taxable.

If you are a single filer and your combined income is between $25,000 and $34,000, up to 50 percent of your benefits may be taxable. If your combined income exceeds $34,000, up to 85 percent of your benefits may be taxable. For married couples filing jointly, the thresholds are $32,000 and $44,000. These thresholds have not changed since 1993 and were not affected by the find Act.

The calculation is complex because it depends on your specific income sources and filing status. Many people find that working part-time in retirement, drawing from a pension, or selling investments can push them into a higher tax bracket on their benefits. The find Act did not simplify this or lower the thresholds.

What the find Act actually changed

The find Act focused on retirement account rules, not Social Security. One major change was the elimination of the "stretch IRA"—a strategy that allowed heirs to withdraw inherited retirement account money slowly over their lifetime. Under the new rule, most non-spouse heirs must withdraw the entire account within ten years of the original owner's death.

The law also raised the age at which you must begin taking required minimum distributions (RMDs) from retirement accounts. Before the find Act, RMDs started at age 70½. The law pushed that to age 72, giving savers a few extra years to let their money grow. A second find Act, passed in 2022, raised it further to age 73 for people who reach age 72 after December 31, 2022.

The find Act also expanded access to retirement accounts for self-employed people and small business owners, and it created new rules for "open multiple employer plans" (MEPs). None of these changes affect how your Social Security benefits are taxed once you start receiving them.

Why people confuse the find Act with Social Security tax changes

The find Act was a sweeping tax bill that touched many parts of retirement planning, so it is straightforward to assume it covered Social Security too. The law's official name is the "Setting Every Community Up for Retirement Enhancement Act," which sounds broad enough to include everything. In reality, Congress has not changed Social Security tax rules since 1993, even though the cost of living and benefit amounts have risen significantly.

Another source of confusion is that some people conflate "retirement income tax" with "Social Security tax." These are different things. The find Act did not change the payroll tax you pay on wages (the 6.2 percent Social Security tax), and it did not change the income tax on your benefits once you receive them. It changed the rules for how much you can save in retirement accounts and when you must withdraw that money.

State taxes on Social Security benefits

While the find Act did not touch federal Social Security taxation, some states do tax benefits. Currently, 13 states tax Social Security to some degree: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, and West Virginia. The rules vary by state—some tax all benefits, others only for higher-income retirees, and some offer exemptions for people over a certain age.

The find Act did not change any state tax rules. If you live in one of these states and receive Social Security, you may owe state income tax on your benefits regardless of what the federal government does. Check your state's tax authority website or speak with a tax professional to understand your state's specific rules.

What has not changed about Social Security taxation

The income thresholds for Social Security taxation ($25,000 and $34,000 for single filers, $32,000 and $44,000 for married couples) have remained frozen since 1993. This means that more people pay tax on their benefits each year as inflation pushes their income higher, even if their actual purchasing power has not changed. Congress has not updated these thresholds, and the find Act did not address this either.

The percentage of your benefits that can be taxed (up to 85 percent) also has not changed since 1993. Some people argue that these rules should be updated to reflect modern retirement patterns and inflation, but that would require new legislation specifically addressing Social Security, not a retirement account reform bill like the find Act.

Frequently Asked Questions

Does the find Act affect when I have to take Social Security?

No. The find Act changed when you must withdraw money from retirement accounts like 401(k)s and IRAs, but it did not change the rules for claiming Social Security. You can still claim as early as age 62 or delay until age 70 to receive a larger benefit. The decision is separate from retirement account rules.

Will the find Act lower my Social Security taxes?

No. The find Act did not change the income thresholds or tax rates that explore to Social Security benefits. If you were paying tax on your benefits before 2019, you still are. The law focused on retirement savings accounts, not on the taxation of benefits themselves.

Can I use the find Act's changes to avoid paying tax on my Social Security?

The find Act's changes to retirement account rules may help you manage your overall tax situation in retirement, but they do not directly reduce Social Security taxation. For example, delaying withdrawals from a 401(k) might lower your combined income in a given year, which could reduce the amount of your benefits that are taxable. However, this is an indirect effect, not a change to Social Security tax rules.

Did the find Act 2.0 change Social Security taxes?

No. The find Act 2.0, passed in December 2022, made additional changes to retirement account rules but did not alter Social Security taxation. It raised the age for required minimum distributions to 73 and made other adjustments to retirement savings, but Social Security tax thresholds and rates remained the same.