Key Facts on Social Security & Taxes
Whether you owe federal income tax on your Social Security benefits depends not on your age, but on your total income. To figure this out, the IRS calculates your “combined income” (sometimes called “provisional income”), which includes your adjusted gross income, any nontaxable interest, and half of your Social Security benefits.
If you’re single (or filing as head of household, or qualifying widow(er)), and your combined income is below $25,000, none of your benefits are taxable. If your combined income falls between $25,000 and $34,000, up to 50% of your benefits may be taxable — though the actual taxable amount is calculated on a sliding scale. If your combined income exceeds $34,000, as much as 85% of your benefits can become taxable.
For married couples filing jointly, the thresholds are higher: if your combined income is less than $32,000, your benefits aren’t taxed. If it’s between $32,000 and $44,000, up to 50% of your benefits may be taxable. Once your combined income exceeds $44,000, up to 85% of benefits may be taxable.
Importantly, the “up to” qualifier means that hitting a higher income bracket doesn’t automatically make all of your benefits taxable — the taxable portion is determined via a formula (often via a worksheet in Internal Revenue Service — Publication 915). Also, for someone whose only income is Social Security (or who stays under the thresholds), their benefits can remain fully tax-free.
Finally, if you expect your benefits to be taxed, you don’t have to wait until you file — you can ask to have federal tax withheld from your monthly Social Security payments.
–To Schedule an appointment with an advisor to discuss your Social Security Benefit Taxes (click here)
