The short answer is yes, Social Security benefits can be subject to a federal and sometimes state tax—but only under certain conditions. If your total income falls under a certain amount, you won’t have to pay anything. Brought to you by TaxGlobal, here’s everything you need to know about Social Security taxes.
How is Social Security income taxed?
Before you can figure out whether or not your Social Security income is subject to taxes, you need to figure out your total amount of income. You can do this by taking your adjusted gross income (AGI)—which includes nontaxable interest—and add half of your Social Security benefits. If you’re filing jointly with your spouse, you’ll combine both of your incomes and add half of your Social Security benefits.
Once you’ve done that, you’ll need to add any of the following that apply back into your AGI:
Adoption benefits provided by your employer (Form 8839, Part III)
Student loan interest deduction
Foreign housing or foreign earned income (Form 2555)
Income earned by residents of American Samoa or Puerto Rico
Compare the final amount with the base numbers for your filing status, and you should be able to see whether or not your Social Security income is subject to taxes. There are three categories your income might fall into:
Income below the base amount means your benefits are not taxable
Income between the base amount and the maximum means up to 50% of your benefits are taxable
Income above the maximum means up to 85% of your benefits are taxable
How much of my Social Security is taxable?
How much of your benefits are taxable depends largely on your filing status. Here are the base and maximum amounts for each status:
Single, head of household, or qualifying surviving spouse: $25,000 - $34,000
Taxable benefits for Income under $25,000: 0%
Taxable benefits for income between $25,000 and $34,000: 50%
Taxable benefits for income greater than $34,000: 85%
Married filing jointly: $32,000 - $44,000
Taxable benefits for Income under $32,000: 0%
Taxable benefits for income between $32,000 and $44,000: 50%
Taxable benefits for income greater than $44,000: 85%
Married filing separately: $0 - $0
If you’re married filing separately but didn’t live with your spouse for any part of the year, you’ll use the first option (single) to calculate your taxable benefits.
At what age will my Social Security stop being taxed?
Unfortunately, your Social Security benefits may always be subject to federal income tax, no matter your age. Whether your benefits are taxed depends on income rather than age, and that income can include money from retirement accounts. However, the taxable part of your benefits will never exceed 85%.
Is all Social Security income taxable?
All Social Security benefits can be taxed, including spousal, survival, and disability benefits. If Social Security benefits are paid to a child using their Social Security Number, the child may be taxed rather than the parent. One type of income that is not taxable is Supplemental Security Income (SSI). Because this isn’t considered a Social Security benefit, it doesn’t count toward your taxable income.
Do states tax Social Security benefits?
In addition to federal taxes, 11 states levy taxes on Social Security. These are:
Connecticut
Kansas
Minnesota
Missouri
Montana
Nebraska
New Mexico
Rhode Island
Utah
Vermont
West Virginia
As with federal income tax, how these states tax your benefits depends on your income and filing status.
Plan ahead for Social Security taxes
You may not be paying taxes on your benefits now if your income is under the base amount, or you may only be paying taxes on 50% of your benefits. If this is the case, you may want to plan for an income increase. When this happens, you’ll have to pay taxes on your additional income and possibly on more of your benefits. You may also move into a higher tax bracket, which would significantly drive up your taxes owed. This might happen if you get a large payout from a retirement plan or receive capital gains from an investment.
You can offset this by spreading out your additional income over multiple years, or by liquidating other assets that aren’t from your retirement account. A Roth IRA is also a good way to minimize taxes, as the contributions aren’t taxable when you withdraw them after you’ve reached age 59½ and held them for over five years.
How to pay Social Security taxes
Did you know you can choose to have tax money withheld from your Social Security income, just like you would with regular income from a job? Simply complete and file Form W-4V. If you don’t choose this option, your best bet is to pay quarterly estimated taxes on your Social Security income.
When filling out your tax return, put your total amount of Social Security income on line 5a of IRS Form 1040, and your total taxable amount on line 5b. If you need help paying taxes on Social Security income, reach out to one of our tax experts or just ask Taby, your go-to AI-powered tax Q&A engine with instant cited answers. We’re here to help.