A:

Some people have to pay federal income taxes on the Social Security benefit they receive. Typically, this occurs only when individuals receive benefits and have other substantial sources of income from wages, self-employment, interest, dividends and/or other taxable income that must be reported on your tax return.

In accordance with Internal Revenue Service (IRS) rules, you won't pay federal income tax on more than 85% of your Social Security benefits. The percentage of benefits for which you will owe income tax is dependent upon your filing status and combined income. If you:

  • File a federal tax return as an "individual" and your combined income is
    • Between $25,000 and $34,000, you may have to pay income tax on up to 50% of your benefits
    • More than $34,000, up to 85% of your benefits may be taxable.
  • File a joint return, and you and your spouse have a combined income that is
    • Between $32,000 and $44,000, you may have to pay income tax on up to 50% of your benefits
    • More than $44,000, up to 85% of your benefits may be taxable.
  • Are married and file a separate tax return, you will probably owe taxes on your benefits.

Note: the IRS defines combined income as your adjusted gross income, plus tax-exempt interest, plus half of your Social Security benefits. You will receive a Social Security Benefit Statement (From SSA-1099) each January detailing the amount of benefits you received during the previous tax year. You can use this when you complete your federal income tax return to determine if you owe income tax on your benefits. If you do owe taxes on your Social Security benefits, you can make quarterly estimated tax payments to the IRS or choose to have federal taxes withheld from your benefits.

RELATED FAQS
  1. Are spousal Social Security benefits taxable?

    Learn about when your Social Security spousal benefits may be taxable, including income thresholds for individuals and those ... Read Answer >>
Related Articles
  1. Retirement

    Will My Social Security Benefits Be Taxed?

    If, and how much, your social security benefits are taxed depends on your income and where you live.
  2. Retirement

    Can Your 401(k) Impact Your Social Security Benefits?

    Find out why income from a 401(k) does not affect the amount of your Social Security benefits, but how it can impact your annual tax bill if you earn too much.
  3. Financial Advisor

    How Social Security Benefits are Taxed

    The tax impact of Social Security benefits is often misunderstood. Here's how advisors can help clients manage their tax liability once benefits commence.
  4. Retirement

    Top Tips for Minimizing Taxes on Social Security

    Social Security benefits are taxable under certain circumstances. Here are some ways retirees can lessen the tax burden.
  5. Retirement

    Common Questions Asked About Social Security

    Here are some answers to common questions asked about Social Security.
  6. Retirement

    How Social Security Works for the Self-Employed

    As both employee and employer, you have to pay more in Social Security, but there are deductions that can help lighten the tax burden.
  7. Taxes

    How Getting A Raise Affects Your Taxes

    Many people think they may actually make less overall because they are paying more taxes.
  8. Financial Advisor

    How Working Longer Impacts Social Security

    A look at the impact of working longer on Social Security retirement benefits.
  9. Retirement

    How Social Security Works After Retirement

    Millions of Baby Boomers are looking forward to collecting benefits, but several factors can affect how much they get and whether the money is taxed.
RELATED TERMS
  1. Social Security Tax

    The tax levied on both employers and employees to fund the Social ...
  2. Federal Income Tax

    A federal income tax is levied by the United States Internal ...
  3. Future Income Tax

    Income tax that is deferred because of discrepancies between ...
  4. Benefits Received Rule

    1. A theory of income tax fairness that says people should pay ...
  5. Social Security

    A United States federal program of social insurance and benefits ...
  6. Income Tax

    A tax that governments impose on financial income generated by ...
Hot Definitions
  1. Racketeering

    A fraudulent service built to serve a problem that wouldn't otherwise exist without the influence of the enterprise offering ...
  2. Aggregate Demand

    The total amount of goods and services demanded in the economy at a given overall price level and in a given time period.
  3. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  4. Blue Chip

    A blue chip is a nationally recognized, well-established, and financially sound company.
  5. Payback Period

    The length of time required to recover the cost of an investment. The payback period of a given investment or project is ...
  6. Collateral Value

    The estimated fair market value of an asset that is being used as loan collateral. Collateral value is determined by appraisal ...
Trading Center