First, I am very sorry to hear about your situation. You are asking great questions that will help you plan and prepare your family for the future. I will attempt to cover your questions one at a time. Please keep in mind my expertise is in taxes, but I will still try to address all of your concerns.
- Will your spouse begin receiving your benefits upon your death?
Your wife may qualify for survivor benefits. These benefits usually start when she turns 60. There is an exception if your wife will be caring for a child who is under 16 or disabled. Speaking with a social security representative would be the best option for understanding all the options for spousal benefits and survivor benefits and how they affect your wife's own benefits.
- Would filing taxes separately be a better option?
In almost every case filing jointly will net you the lowest tax liability. In some cases filing separately would at best give you the same tax liability. It is very rare that filing separate is better from a tax perspective. Filing separately does have other benefits though. These benefits are usually for times when you need a separate accounting for your income and your spouse's income. For example, in a divorce or when calculating repayments on loans that are dependent on your income.
- What is your tax liability?
That is a hard question to answer in this forum because a lot goes into calculating your tax liability. Your wife’s income is missing from your scenario and I’m not sure I understand about your rental income/expenses. A quick calculation that makes a lot of assumptions puts your total income at $121,200 less $25,100 for the standard deduction to equal $96,100 taxable income. At the 22% rate this gives you around $22,200 in taxes. Please remember this is grossly oversimplifying your tax situation though. TurboTax has a handy tool, The TaxCaster, that can help you with estimating your taxes under different scenarios and can provide you with a more accurate estimate.
- Should I have taxes withheld from my Social Security? If so at what rate?
Mostly likely, yes. You should take into consideration the withholding you already have in place, but usually adding more income means that you should also add more withholding. The rate will depend on how much you want to owe at the end of the year. If you want a refund you want to withhold at a higher rate. If you are okay with owing a little, you can have less withheld. With our quick estimate above you would need at least $22,200 in withholding to cover your taxes. Look at your other sources of income and how much you are having withheld currently to determine if you will be short without adding withholding to your social security. Getting a more accurate estimate would be best in this situation. Then you can compare your current withholding with a more accurate number to see if you will be over or short.
Please do not hesitate to contact us by phone to get more information. As you mentioned, this forum is limited in the information we can gather or share. A phone call can give you more details and clarify some of the information I am missing. I wish you and your family well!
