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Throughout your working career, you pay Social Security taxes with the hope that when you retire, you’ll receive some steady income in the form of Social Security benefits.
You may think that since paying tax led to those benefits, the benefits themselves shouldn’t be subject to federal income tax. But in certain circumstances, your Social Security benefits could be taxable.
Typically, you’ll only have to pay taxes on Social Security benefits if you have other substantial sources of income, according to the Social Security Administration. This includes income from self-employment, wages from a job, investment income like interest and dividends, or other forms of taxable income. And even if your benefits are subject to federal income tax, you’ll only pay tax on up to 85% of your benefits.
Here’s how to know whether your Social Security benefits are taxable and how big a bite the IRS could take.
- What kinds of Social Security benefits are we talking about?
- How are Social Security benefits taxed?
- Things to know about Social Security benefits
What kinds of Social Security benefits are we talking about?
When someone mentions Social Security, you may think of Social Security retirement benefits. But that’s just one form of Social Security benefits. Here are the types of benefits that the Social Security Administration pays to recipients who meet certain eligibility requirements.
- Retirement benefits — Paid to retired workers who are at least 62 years old, their spouses and their children
- Survivor benefits — Paid to the widows or widowers and children of deceased workers
- Disability benefits — Paid to workers who become disabled, or their spouses and their children
The SSA provides more information on these benefits and the types of beneficiaries who qualify to receive them. If you receive any kind of Social Security benefits, you should receive an SSA-1099 (or a 1042S if you’re a noncitizen who lives outside the U.S.) from the Social Security Administration detailing the total amount of your benefits from the tax year.
No matter which type of Social Security benefits you receive, if you have other sources of income, including a pension or annuity, a part-time job, or income from self-employment or investments, that additional income could cause at least part of your Social Security benefits to be taxable. The SSA says that about 40% of people who receive Social Security have to pay income taxes on their benefits.
That said, if Social Security is your only source of income in retirement, you probably won’t have to pay federal income tax on your benefits.
How are Social Security benefits taxed?
The good news is that no matter how much you earn, the IRS will treat no more than 85% of your Social Security benefits as taxable income. Here’s how to figure out how much of your benefits may be taxable.
Step 1: Determine your combined income
Do you have income in addition to Social Security? If so, you need to determine your “combined income.” Combined income is the total of your adjusted gross income (Line 7b on Form 1040) without Social Security benefits, plus nontaxable interest, plus one-half of your Social Security benefits.
For example, say Jodi had the following sources of income in 2019:
- $25,000 in wages from a part-time job
- $100 in nontaxable municipal bond interest
- $12,000 in Social Security retirement benefits
For 2019, Jodi’s combined income would be $31,100. That’s the $25,000 of wages, plus the $100 of nontaxable interest, plus half of her $12,000 in Social Security benefits.Learn what counts as taxable income
Step 2: Determine your tax filing status
Once you know your combined income, you can compare that number to the threshold for your tax filing status. This will tell you how much of your Social Security benefits are taxable.
Here are the thresholds for the 2019 tax year.
- Single or head of household — If your combined income is between $25,000 and $34,000, up to 50% of your benefits may be taxable. If your combined income is more than $34,000, up to 85% of your benefits may be taxable.
- Married filing jointly — If you and your spouse have a combined income between $32,000 and $44,000, up to 50% of your benefits may be taxable. If your combined income is more than $44,000, up to 85% of your benefits may be taxable.
- Married filing separately — If you’re married and file a federal income tax return separately from your spouse, you most likely have to pay taxes on your benefits.
Assuming Jodi’s filing status is single, up to 50% of her Social Security benefits would be taxable because her combined income is between $25,000 and $34,000 for 2019.
What if Jodi earned just $10,000 from her part-time job instead of $25,000? In that case, her combined income would be $16,100 (that’s $10,000 in wages plus $100 in municipal bond interest plus half of her $12,000 in Social Security benefits). Jodi’s combined income would be below $25,000, so none of her Social Security benefits would be taxable.
If you need help making your own calculations, Worksheet A in IRS Publication 915 can help you calculate exactly how much of your Social Security benefits are taxable.
Things to know about Social Security benefits
Here are some more things you need to know about taxable Social Security benefits.
Watch for Form SSA-1099
At the end of each year, the SSA will mail you a Social Security Benefit Statement, Form SSA-1099 (or a 1042S if you’re a noncitizen living outside the U.S.). This form shows you the total benefits you received. You’ll need this statement to calculate your taxable benefits and complete your federal income tax return.
If you’re ready to file your tax return but haven’t yet received Form SSA-1099, you can go online and print a replacement by logging into your Social Security account. Your Form SSA-1099 for the previous year is available after Feb. 1 of the current year.
You can have federal income taxes withheld from Social Security benefits
The IRS doesn’t require people to have federal income taxes withheld from their Social Security benefits, but you can choose to have taxes withheld instead of making quarterly estimated payments or owing a big chunk of change to the IRS at tax time.
You can ask the SSA to withhold federal income taxes from your benefit payments when you first apply, or start or adjust your withholding using Form W-4V.
When you complete Form W-4V, you can select the percentage of your monthly benefit you want the SSA to withhold: 7%, 10%, 12% or 22%.
After completing the form, sign it and return it to your local Social Security office, either by mail or in person.
If your only income is Social Security benefits, you may not have to file a tax return
When you retire, you could have multiple sources of income from retirement accounts like an IRA, a 401(k) or earnings from investments. But if your only source of income is your Social Security check, you might not have to file a federal tax return at all. Your filing requirement depends on your filing status, age and gross income.
Check out Charts A, B and C in the IRS Instructions for Form 1040 and 1040-SR or use the IRS’s Do I Need to File a Tax Return? tool to help you determine whether you’re required to file a tax return, or if you should file to receive a refund.What forms do you need to file your federal taxes?
Only include benefits that are legally yours
If you and your child both receive Social Security benefits, the check for your child might be made out in your name. But your child’s portion of those benefits doesn’t count toward your taxable income. Be sure to use only your part of the benefits when calculating whether you might owe tax.
Add the benefits paid to your child (typically reported in Box 3 on your SSA-1099) to your child’s other income to see whether your child needs to file a tax return and whether any of their benefits are taxable.
If you receive Social Security benefits, take some time to figure out how much of your benefits may be subject to federal income tax. And check your state’s tax rules because some states with personal income tax systems exclude Social Security from taxable income, while others do subject Social Security income to state taxes.
While the rules and calculations might seem complicated, familiarizing yourself with them now can save you from an unwelcome surprise at tax time.
A senior product specialist with Credit Karma Tax®, Janet Murphy is a CPA candidate with more than a decade in the tax industry. She’s worked as a tax analyst, tax product development manager and tax accountant. She has accounting degrees and certifications from Clemson University and the U.S. Career Institute. You can find her on LinkedIn.