Social Security began in 1935, and for almost the first 50 years of the program, none of those benefits were subject to federal income taxes.

Fast forward to today, and almost 50% of workers are paying federal taxes on those Social Security benefits they receive.

In today's video, we're going to talk about a brief history of how this came to be.

We're going to talk about comments the President Trump has recently made about ending taxation on Social Security, and we're going to discuss what

this potentially means for you and what you can do to prepare.

This is another episode of Ready for Retirement. I'm your host, James Cannell, and I'm here to

teach you how to get the most of the life with your money. And now, on to the episode.

Prior to 1935, Social Security did not exist. In 1935, the program is rolled out, and as part of the

program, when you were receiving benefits, those benefits were not subject to federal income taxes.

And that was the case all the way until 1983 and 1983 amendments were passed, and those amendments subjected Social Security to federal income taxes for certain high income earners.

Something was introduced, and that something was called provisional income.

Starting in 1984, people whose provisional income was over a certain threshold had a portion of their benefits subject to taxes.

Now, that provisional income threshold, starting in 1984, was $25,000, where if your provisional income exceeded that,

you owed taxes on part of your Social Security benefit. So practically speaking,

what happened when that change was made was 0% of people who were receiving Social Security

benefits were paying federal taxes on those benefits to fewer than 10% of people who were receiving benefits

started paying taxes on that. So it was not a dramatic change in terms of the number of

people who were paying taxes on their benefits. Here's the thing about provisional income,

though. The provisional income thresholds, which if you were single, started at $25,000, and if you're

married started at $32,000, once your provisional income exceeded those amounts, you started having

some of your Social Security benefit taxed.

But those amounts, those thresholds, were not adjusted for inflation.

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