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 line 43 of Form 1040. This value is your gross income minus all allowable deductions.

Key Takeaways

  • The amount of Social Security benefits to include as gross income varies from a maximum of 85% all the way down to 0%.
  • Review IRS Publication 915 for the process of calculating this amount.
  • After calculating this amount, you must include it on line 20b of Form 1040 or line 14b of Form 1040A as ordinary income.

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

The amount of Social Security benefits to include as gross income varies from a maximum of 85% all the way down to 0%. Review IRS Publication 915 for the process of calculating this amount. After calculating this amount, you must include it on line 20b of Form 1040 or line 14b of Form 1040A as ordinary income.

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 and personal exemptions are subtracted from this total. What remains is subject to tax using tax brackets and the IRS tax tables. For 2019, for those married filing jointly, the first $19,050 of ordinary income is taxed at 10%, from $19,051 to $77,400 is taxed at 12%, from $77,401 to $165,000 is taxed at 22%, and so on, up to the top bracket of 37% for income at $600,001 and up. There are currently seven tax brackets.