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Presenter outlines taxes, the earnings test, and how Social Security benefits can be taxed
Summary
The presenter reviewed payroll taxes funding Social Security, the 2025 earnings test threshold and withholding rules for early claimants who continue working, and federal rules that make 50% or 85% of benefits taxable depending on combined income; Nebraska’s 2023 decision to exempt Social Security from state income tax was noted.
The presenter explained how payroll taxes fund Social Security and how working while claiming early can reduce monthly payments temporarily under the earnings test.
On funding, the presenter said employees pay 6.2% in Social Security tax on earnings up to the quoted wage base (the presenter cited $176,100) and 1.45% for Medicare, with employers generally matching those rates. The presenter also mentioned an additional 0.9% Medicare tax that applies to higher earners.
On the earnings test, the presenter stated that in 2025 the lower annual exempt amount for people who claim before full retirement age is $23,400 and described the SSA rule that for every $2 earned above that limit SSA withholds $1 from benefits until full retirement age. Using an example the presenter showed how an overage is divided to determine the withheld amount and said SSA will withhold whole benefit payments to satisfy reductions.
On taxation, the presenter summarized federal rules that make either 50% or 85% of Social Security benefits subject to federal income tax depending on combined income (the example walked through using AGI plus half of benefits to determine the taxable portion). The presenter also noted that, as of the 2023 legislative session, Nebraska no longer taxes Social Security benefits.
The presenter advised attendees to check SSA guidance or consult a tax professional for individual tax treatment.
