Social Security tax: Do you pay taxes on Social Security?

Ah, retirement… Time to kick back and enjoy your golden years. As you start to draw Social Security income, taxes may be the last thing on your mind. Many taxpayers in the United States are surprised to learn that if they receive Social Security benefits, they may have to pay income tax on up to half or even 85% of their Social Security income.

Not only could part of your Social Security benefits be taxable, but the additional income will impact your AGI, taxable income, and possibly your tax bracket. On the other hand, your benefits will not be taxable if your total income is below the base amount.

If you’re married and filing jointly with your spouse, your combined income and Social Security benefits are used to figure your total income. Read on to learn more about tax on Social Security and important considerations for tax on your retirement benefits.

How does Social Security income tax work?

To determine when Social Security income is taxable, you’ll first need to calculate your total income. Generally, the formula for total income, or what the Social Security administration refers to as “combined” income, for this purpose is your adjusted gross income (AGI), including any nontaxable interest, plus half of your Social Security benefits. If you’re married and filing jointly with your spouse, both of your combined incomes plus half of your Social Security benefits are used to figure your total income. You will also need to add back the following items to your AGI:

• Employer-provided adoption benefits (Form 8839, Part III),
• The student loan interest deduction
• Foreign earned income or foreign housing (Form 2555), or
• Income earned by a bona fide resident of American Samoa or Puerto Rico

Then you’ll compare your total income with the base amounts for your filing status to find out how much of your Social Security income is taxable, if any.

You’ll see that you fall into one of three categories. If your total income is:

• Below the base amount, your Social Security benefits are not taxable.
• Between the base and maximum amount, your Social Security income is taxable up to 50%.
• Above the maximum amount, your Social Security benefits are taxable up to 85%.

How much of your Social Security income is taxable?

Review the list below to determine where your total income falls and how much of your Social Security income is taxable based on your tax filing status. For:

• Single, Head of Household, or Qualifying Surviving Spouse, the base amount is $25,000 and the maximum is $34,000.
• Married Filing Jointly, the base amount is $32,000 and the maximum is $44,000.
• Married Filing Separately, the base amount is $0 and the maximum is $0. (Note: Those using the Married Filing Separately status who lived apart the entire tax year use the same base and maximum amounts as single filers.)

Refer to the tables below to see how much of your Social Security income is taxable.

Single, Head of Household, or Qualifying Widow(er)

Married Filing Jointly

Married Filing Separately

Up to 85% of Social Security income may be taxed for those who are Married Filing Separately and lived with their spouse at any time during the tax year. If you are Married Filing Separately and lived apart from your spouse for the entire tax year, reference the chart above for Single, Head of Household, or Qualifying Surviving Spouse.

At what age is Social Security no longer taxed?

Social Security income can be subject to federal income tax no matter how old you are. The IRS determines if your Social Security benefits are taxable based on income, not age. Generally, your Social Security benefits will be subject to federal tax when your total income is more than the thresholds listed above. This includes income from investments held in retirement accounts like Traditional 401(k)s and IRAs. Under the current tax codes, the taxable portion of your Social Security benefits won’t exceed 85%.

Are all kinds of Social Security income taxable?

The tax rules for Social Security apply to more than just retirement benefits. All Social Security benefits are taxable in the same way. This applies to spousal benefits, survivor benefits, and disability benefits like Social Security Disability Insurance (SSDI). Take note that Social Security benefits paid to a child under his or her Social Security number (SSN) could be potentially taxable to the child, not the parent.

Supplemental Security Income, or SSI, is a non-taxable, needs-based federal benefit. It is not part of Social Security benefits and does not figure into the taxable benefit formula.

State income tax on Social Security

There are 11 states that levy state income tax on Social Security in some cases. Consult with your state tax agency if you live in Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, or West Virginia. Like with federal tax, how these states tax Social Security varies by income and other criteria.

Social Security tax considerations

If you aren’t paying tax on your Social Security benefits now because your combined income is below the base amount for your filing status, or you are paying tax on only 50% of those benefits, an unplanned increase in your income can have a massive tax cost. You’ll have to pay tax on the additional income and on (or on more of) your Social Security benefits — plus, you may get pushed into a higher marginal tax bracket.

This situation can arise when you receive a large distribution from a retirement plan (such as an IRA) during the year or have large capital gains from a taxable investment. Careful planning may help you avoid this tax result. For example, it may be possible to spread the additional income over more than one year, or liquidate assets other than an IRA account.

Still saving for retirement? Consider a Roth

If you are still many years away from retirement, you can limit the amount of tax you will pay on Social Security income down the line by investing in a Roth IRA. Contributions to a Roth IRA or Roth 401(k) are not subject to taxation when funds are withdrawn in a qualified distribution, meaning you won’t have to worry about additional taxes from this type of retirement income if you’ve followed the following rules. Specifically, if distributions from this type of retirement account are taken after you turn 59 ½ and you’ve had the account for more than five years, they will be tax-free. This payout won’t affect your taxable income calculation and therefore won’t increase the tax you owe on your Social Security benefits.

Paying Social Security tax

Social Security recipients have a choice when it comes to receiving their payments Just as you can request additional tax withholding from your regular W-2 income, you can have the Internal Revenue Service (IRS) withhold taxes from your Social Security payments. So, if you know your Social Security benefits are taxed, you can voluntarily arrange to have the tax withheld from your Social Security payment by filing a Form W-4V. Otherwise, you may have to make quarterly estimated tax payments to the IRS.

Once you’ve calculated the amount of your Social Security income that’s taxable, you will need to enter that amount on your income tax return. On IRS Form 1040, you will write the total amount of your Social Security benefits on line 5a and the taxable amount on line 5b. If you’re using tax software, the software will automatically calculate the taxable portion of your Social Security benefits.

More help with tax Social Security benefits

Looking for more help with determining your taxable Social Security income? Whether you use a tax pro at one of our H&R Block office locations or file online, we can help you minimize your tax burden on Social Security benefits.