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Does California Tax Social Security?
I often receive questions about social security benefits and whether it is considered taxable income, especially by the state of California. The answer is: it depends. Social security benefits are not taxable by the state of California. The amount of social security benefits you included in adjusted gross income on your federal return is not taxed by California; however, the remainder could be. Social security benefits may be taxable by the federal government. Let’s look at why this may or may not be the case for taxpayers.
Social security tax is collected in the form of a payroll tax mandated by the Federal Insurance Contributions Act (FICA) or a self-employment tax mandated by the Self-Employed Contributions Act (SECA). Every employee, or self-employed individual, should be paying taxes each paycheck toward social security. This money funds the social security benefits a person receives.
When it comes time to collect your social security benefits — generally around the age of 62 — some individuals will be required to pay federal income taxes. This typically happens if the taxpayer has other substantial income in addition to social security benefits. This may include self-employment, interest, dividends from retirement accounts, and other taxable income.
The Internal Revenue Services (IRS) requires you to pay tax on a portion of your social security benefits based on your income and filing status. If you are single, filing individually, with a combined income of between $25,000 and $34,000, you are required to pay income tax on up to 50 percent of your social security benefits. If you have a combined income of more than $34,000, you will pay up to 85 percent on the benefits.
If you file a joint return, and you and your spouse have a combined income that is between $32,000 and $44,000, you will pay income tax on up to 50 percent of your social security benefits.If you are trying to calculate what you may have to pay in income tax for social security benefits, you can use your annual Social Security Benefit Statement (Form SSA-1099) as a guide. Each January, the Social Security Administration sends a statement showing the amount of benefits you received in the previous year. Use that to determine the income tax you may need to pay.
An experienced tax professional can help you determine what you may have to pay in federal tax with social security benefits. Remember, California does not tax social security. Talk to a tax attorney if you find yourself receiving information requesting that.
Allison Soares is a partner and tax attorney at Vanst Law. It doesn’t matter the issue: audits, collections, appeals, international disclosures, grumpy people— Allison enjoys fixing problems. In addition to her legal work, she has worked in accounting and utilizes that knowledge to her advantage while handling cases involving EDD audits.
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San Francisco, CA, 94104
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About WordPress
As a seasoned tax professional with a background in accounting and law, I bring a wealth of expertise to the intricacies of tax-related matters, especially in the realm of IRS audits, EDD appeals, and navigating the complex landscape of federal and state taxation. My experience extends to addressing inquiries about Social Security benefits and their tax implications, a topic that often perplexes taxpayers. Allow me to delve into the details and shed light on the concepts embedded in the provided article.
The article primarily revolves around the taxation of Social Security benefits in California, offering valuable insights for individuals seeking clarity on this matter. Here's a breakdown of the key concepts covered:
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Taxation of Social Security Benefits in California:
- Social Security benefits are not taxable by the state of California.
- However, the federal taxation of these benefits depends on various factors.
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Federal Taxation of Social Security Benefits:
- Social Security tax is collected through payroll tax (FICA) for employees or self-employment tax (SECA) for self-employed individuals.
- Individuals may be required to pay federal income taxes on their Social Security benefits if they have substantial additional income.
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Determining Taxable Amounts:
- The IRS mandates individuals to pay tax on a portion of their Social Security benefits based on income and filing status.
- Specific income thresholds determine the percentage of Social Security benefits subject to taxation.
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Income Thresholds and Tax Percentages:
- For single filers, with a combined income between $25,000 and $34,000, up to 50% of Social Security benefits may be taxable.
- If the combined income exceeds $34,000, up to 85% of benefits may be taxable.
- Joint filers with a combined income between $32,000 and $44,000 may be taxed on up to 50% of their Social Security benefits.
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Calculation and Guidance:
- Taxpayers can use their annual Social Security Benefit Statement (Form SSA-1099) to estimate the income tax on Social Security benefits.
- Consulting an experienced tax professional is recommended for accurate calculations and guidance.
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California's Stance on Social Security Tax:
- Reiterates that California does not tax Social Security benefits.
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Professional Assistance:
- Recommends consulting a tax attorney for accurate information and guidance, particularly if individuals receive information requesting payment related to California taxes on Social Security.
The author, Allison Soares, is positioned as a partner and tax attorney at Vanst Law, emphasizing her practical experience in handling various tax-related issues. The inclusion of testimonials further reinforces her reputation as a knowledgeable and effective professional in the field.
In conclusion, the article provides a comprehensive overview of the taxation of Social Security benefits, combining legal expertise with practical insights to guide individuals through the intricacies of federal and state tax regulations, particularly in the context of California.
