Yes, a portion of your Social Security benefits may be subject to federal taxation using tax brackets. Your tax bracket is determined by your net taxable income, as shown on Form 1040. This value is your gross income minus all allowable deductions. For social security income that is combined with your other income, you may be subject to income tax on up to 85% of your SS benefits.

Key Takeaways

  • Up to 85% of Social Security income benefits may be taxed depending on total annual income. 13 states also individually tax Social Security income.
  • Each year, thresholds for federal income tax brackets, as well as Social Security income limits, are published by the IRS.
  • Review IRS Publication 915 for the process of calculating your income tax due on benefits.

What Portion of Your Household's Social Security Benefits Is Subject to Federal Income Tax?

Generally, up to 50% of your benefits will be taxed. However, up to 85% of benefits could be taxed if you are married filing separately, and you lived with your spouse any time during the tax year. Or if one-half of your benefits and all your other income is greater than $34,000 ($44,000 if married filing jointly).

Review IRS Publication 915 for the process of calculating this amount. After calculating this amount, you must include it on Form 1040 as ordinary income.

A senior whose only source of income is Social Security does not have to pay federal income taxes on their benefits. If the taxpayer receives other sources of income, including tax-exempt interest income, they must add one-half of annual Social Security benefits to their other income and then compare the result to a threshold set by the IRS. If the total is more than the IRS threshold, some Social Security benefits are taxable.

For 2020, the threshold amount is $25,000 for singles and $32,000 for married couples filing jointly. Married couples who live together but file separately have a threshold of $0 and must pay taxes on Social Security benefits regardless of other income earned.

Social Security and Income Tax
IRS.gov 

What Is Ordinary Income?

Ordinary income represents most of your household's taxable income from sources such as wages, self-employment income, pensions, Social Security benefits, rents, royalties, and interest.  Other forms of household income—such as capital gains, qualified dividends, and capital gains from collectibles—are not considered to be ordinary income; instead, they are taxed at different rates.  

How Is Ordinary Income Taxed?

All sources of ordinary income are added together, and then all allowable deductions are subtracted from this total. What remains is subject to tax using tax brackets and the IRS tax tables.

For 2019, the income brackets for single taxpayers are as follows:

  • 10% for income of $9,700 or less ($19,400 for married joint filers)
  • 12% for income over $9,700 ($19,400 for married joint filers)
  • 22% for income over $39,475 ($78,950 for married joint filers)
  • 24% for income over $84,200 ($168,400 for married joint filers)
  • 32% for income over $160,725 ($321,450 for married joint filers)
  • 35% for income over $204,100 ($408,200 for married joint filers)
  • 37% for income over $510,300 ($612,350 for married joint filers)

For 2020, the income brackets remain the same. However, the thresholds move up slightly. For single taxpayers, they are as follows:

  • 10% for income of $9,875 or less ($19,750 for married joint filers)
  • 12% for income over $9,875 ($19,750 for married joint filers)
  • 22% for income over $40,125 ($80,250 for married joint filers)
  • 24% for income over $85,525 ($171,050 for married joint filers)
  • 32% for income over $163,300 ($326,600 for married joint filers)
  • 35% for income over $207,350 ($414,700 for married joint filers)
  • 37% for income over $518,400 ($622,050 for married joint filers)

States That Tax Social Security Benefits

Most states do not tax Social Security benefits, but 13 do under certain circumstances. They are Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont, and West Virginia.

However, West Virginia passed a law that will phase out the state income tax on Social Security benefits. For the 2019 tax year, 35% of benefits will be exempt. In 2020, the exemption rises to 65%. By 2021, Social Security benefits will be fully exempt. 

Iowa previously taxed Social Security benefits until phasing the taxes out completely in 2014.

Connecticut exempts Social Security benefits if you are a single filer with an income of less than $50,000. If you are married filing jointly, the exemption is $60,000 before benefits are taxed. Kansas fully exempts benefits, regardless of filing status, if your federal adjusted gross income is less than $75,000. In Missouri, benefits are exempt for beneficiaries 62 and older and if their income is less than $85,000, or $100,000 if married filing jointly. Colorado excludes some pension and annuity payments from income taxes, including Social Security benefits. Residents at least 55 years old can exclude up to $20,000, while those who have reached the age of 65 can exclude $24,000. Utah offers a non-refundable tax credit of up to $450 against retirement income. The credit phases out at $25,000 for single filers and $32,000 for married couples filing jointly. New Mexico allows residents 65 and older to deduct up to $8,000 in income. The deduction phases out at $28,500 for single taxpayers and $51,000 for married couples filing jointly.