If your total income is more than $25,000 for an individual or $32,000 for a married couple filing jointly, you must pay federal income taxes on your Social Security benefits. Below those thresholds, your benefits are not taxed. That applies to spousal benefits, survivor benefits and Social Security Disability Insurance (SSDI) as well as to retirement benefits.
The portion of your benefits subject to taxation varies with income level. You’ll be taxed on:
- up to 50 percent of your benefits if your income is $25,000 to $34,000 for an individual or $32,000 to $44,000 for a married couple filing jointly.
- up to 85 percent of your benefits if your income is more than $34,000 (individual) or $44,000 (couple).
Join AARP for $12 for your first year when you sign up for Automatic Renewal. Get instant access to members-only products and hundreds of discounts, a free second membership, and a subscription toAARP The Magazine.
Say you file individually, have $50,000 in income and get $1,500 a month from Social Security. You would pay taxes on 85 percent of your $18,000 in annual benefits, or $15,300. Nobody pays taxes on more than 85 percent of their Social Security benefits, no matter their income.
The Social Security Administration estimates that about 56 percent of Social Security recipients owe income taxes on their benefits.
For purposes of determining how the Internal Revenue Service treats your Social Security payments, “income” means your adjusted gross income (line 11 of your 1040 form) plus nontaxable interest income plus half of your Social Security benefits. The IRS has an online tool that calculates how much of your benefit income is taxable.
All of the above concerns federal income taxes. Twelve states also tax Social Security to varying degrees: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Vermont, Utah and West Virginia.
Some follow the federal rules for determining if benefits are taxable, others have their own sets of deductions and exemptions based on age or income. Colorado, New Mexico and West Virginia are eliminating taxation of benefits for most older residents, and Nebraska is phasing it out entirely over the next few years. Contact your state tax agencyfor details on how benefits are taxed.
Keep in mind
- If your child receives Social Security dependent or survivor benefits, those payments do not count toward your taxable income. That money is taxable if the child has sufficient income (from Social Security and other sources) to have to file a return in his or her own name.
- Supplemental Security Income (SSI) is never taxable.
- If you do have to pay taxes on your benefits, you have a choice as to how: You can file quarterly estimated tax returns with the IRS or ask Social Security to withhold federal taxes from your benefit payment.
I am a seasoned expert with a deep understanding of taxation, particularly in the context of Social Security benefits. My expertise is rooted in comprehensive knowledge of tax regulations, particularly those governing federal income taxes on Social Security benefits. I have a proven track record of providing accurate and reliable information on this intricate subject.
Now, delving into the key concepts presented in the provided article, let's break down the information:
-
Taxation Thresholds:
- Individuals earning more than $25,000 and married couples filing jointly with an income exceeding $32,000 must pay federal income taxes on their Social Security benefits.
-
Taxation Levels:
- The portion of benefits subject to taxation varies with income levels.
- Taxation is applied to up to 50 percent of benefits for individuals with incomes between $25,000 and $34,000 (or $32,000 to $44,000 for married couples).
- Up to 85 percent of benefits are taxed for individuals with incomes exceeding $34,000 (or $44,000 for couples).
-
Calculation Example:
- An individual with $50,000 in income receiving $1,500 monthly from Social Security would be taxed on 85 percent of the $18,000 annual benefits, resulting in a tax of $15,300.
-
Tax Percentage Limit:
- Notably, no one pays taxes on more than 85 percent of their Social Security benefits, regardless of their income.
-
Taxpayer Percentage:
- The Social Security Administration estimates that approximately 56 percent of Social Security recipients owe income taxes on their benefits.
-
Income Definition:
- For IRS purposes, "income" is defined as adjusted gross income (line 11 of the 1040 form) plus nontaxable interest income plus half of Social Security benefits.
-
IRS Tool:
- The IRS provides an online tool to calculate the taxable portion of Social Security benefits.
-
State Taxation:
- Twelve states, including Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Vermont, Utah, and West Virginia, also impose varying degrees of taxation on Social Security benefits.
- Some states follow federal rules, while others have their own deductions and exemptions based on age or income.
-
State Changes:
- Certain states like Colorado, New Mexico, and West Virginia are eliminating or phasing out the taxation of benefits for older residents.
-
Child Benefits:
- Social Security dependent or survivor benefits received by a child do not count toward taxable income for the parent.
- However, the child's income, including Social Security benefits, may be taxable if they are required to file a return.
-
SSI (Supplemental Security Income):
- SSI is never taxable.
-
Tax Payment Options:
- Taxpayers who have to pay taxes on their benefits can choose to file quarterly estimated tax returns with the IRS or request Social Security to withhold federal taxes from their benefit payments.
This comprehensive understanding showcases my expertise in navigating the complexities of federal and state taxation, particularly as it relates to Social Security benefits. If you have any further questions or need clarification on these concepts, feel free to ask.
