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Updated on Friday, October 30, 2020
Whether you have to pay federal or state income taxes on your Social Security benefits is dependent on your overall income. If you don’t have income from other sources, you likely won’t have to pay taxes on your benefits. If you do have other income, you may have to pay taxes on a portion of the benefits you receive, depending on how much that income is.
Below, learn how Social Security benefits are taxed for different scenarios and income brackets.
- Is Social Security income taxable?
- Calculate your Social Security income tax
- How to file Social Security income tax
- How to save on Social Security income tax
- Do states tax Social Security benefits?
Is Social Security income taxable?
Social Security is taxed based on your total income. To determine whether or not you owe income taxes on your Social Security benefits according to IRS rules, you need to look at your combined income. Your combined income is the total of the following:
- Adjusted gross income (including wages, self-employment income, pension benefits, interest earned and dividends received)
- Nontaxable interest
- 50% of your Social Security benefits
According to Joshua Zimmelman, managing partner of Valley Stream, N.Y.-based Westwood Tax & Consulting, you have to pay taxes on your Social Security benefits if your combined income is over $25,000, or over $32,000 if you’re married and file a joint tax return. That rule applies even to children and survivors of deceased workers.
“Social Security benefits paid to children are taxable for the child, but only if they earn enough to be taxed,” said Zimmelman. “If survivor benefits are the child’s only taxable income, they would not be taxable. If the child’s income is [at least] $25,000, then a portion of their survivor benefits would be taxed.”
How to calculate your Social Security income tax
If you collect Social Security benefits, you’ll receive an SSA-1099 Form that will tell you how much you received in benefits for the year. Using that information, you can calculate how much you’ll owe in income taxes.
Take a look at the table below to see is how much of your benefits are taxable based on your income:
|Combined income||Amount of Social Security benefits you owe tax on|
|Between $0 and $24,999||None|
|Between $25,000 and $34,000||Up to 50% of your benefits|
|$34,000 and up||Up to 85% of your benefits|
|Combined income||Amount of Social Security benefits you owe tax on|
|Between $0 and $31,999||None|
|Between $32,000 and $44,000||Up to 50% of your benefits|
|$44,000 and up||Up to 85% of your benefits|
“If your income plus half your benefits exceed $32,000 but not more than $44,000, you will be taxed on one-half of the excess over $32,000 or one-half of the benefits, whichever is lower,” said Gail Rosen, a certified public accountant in Martinsville, N.J.
If you’re single, the base amount is $25,000. If you’re married filing jointly, the base amount is $32,000. No one will pay taxes on more than 85% of their Social Security benefits, no matter how high their income.
An example of how Social Security is taxed
Let’s use an example to illustrate how taxes may be paid on your Social Security. Jan is single and started collecting Social Security benefits in 2020 at the age of 70. She received the maximum because she waited to collect until she was 70, so she got $3,790 per month, or $45,480 per year. Jan worked part time and earned an additional $10,000, but had no nontaxable interest or dividends to report. In this scenario, Jan adds her wages — $10,000 — to 50% of her Social Security benefits, or $22,740. Her combined income is $32,740.
Because Jan is over the $25,000 threshold for individual taxpayers, she will have to pay income taxes on some of her Social Security benefits.
Jan’s combined income is $32,740. She subtracts the base amount — $25,000 — from her combined income to get $7,740. Because her combined income is between $25,000 and $34,000, she has to pay taxes on 50% of that amount, or $3,870. The taxable amount of her Social Security benefits is $3,870.
|Jan’s Social Security Taxation|
|Total Social Security benefit||$45,480|
|One-half of Social Security benefits||$22,740|
|Adjusted gross income||$10,000|
|Add one-half of Social Security benefits and adjusted gross income||$32,740|
|Subtract MAGI base amount ($25,000)||$7,740|
|Subtract $9,000 if filing as an individual or $12,000 if married filing jointly. If zero or less, enter $0||$0|
|Enter one half of result ($7,740) to get the taxable amount of Social Security benefits||$3,870|
How to file Social Security income tax
Next, you need to learn how to file taxes with Social Security income. You can file taxes by following these steps:
- Fill out form 1040: Social Security benefits are reported in Box 5 of Form SSA-1099, where you enter that amount on line 5a of Form 1040 – U.S. Individual Income Tax Return or Form 1040-SR – U.S. Tax Return for Seniors.
- Decide if you want to make quarterly tax payments, adjust your Social Security withholding or pay a lump sum: It’s wise to pay taxes throughout the year. You can do so by withholding income tax from your Social Security benefits, making quarterly estimated tax payments or paying a lump sum.
- If you decide to withhold: Fill out the Voluntary Withholding Request form and choose if you want 7%, 10%, 12% or 22% of your benefits withheld.
- If you decide to make quarterly payments: To make quarterly estimated tax payments, you can send your payments by mail, online or over the phone.
- If you decide to pay a lump sum: You’ll pay your income taxes on your Social Security benefits when you file your return in April. However, if you owe money, you may be charged a penalty.
How to save on Social Security income tax
If you’re looking to lower your Social Security tax, here are two strategies you can consider:
Delay claiming your Social Security benefits
If you have other sources of retirement income, such as a 401(k) and other investments, or are working, you may consider delaying claiming your Social Security benefits. If you wait until age 70, you’ll get a larger benefit. Additionally, you will draw down your other accounts that may be taxed at a higher rate, possibly lowering how much you pay in Social Security income taxes later on.
“If you haven’t started receiving Social Security yet, consider taking IRA withdrawals before they’re required,” said Zimmelman. “This will reduce your IRA balance by the time you start Social Security.”
Convert your retirement savings into a Roth IRA
Roth IRAs are especially useful when you’re in retirement. You can make withdrawals tax-free once you reach the age of 59½, and they’re not subject to required minimum distributions. Withdrawals aren’t taxable, and they do not factor into how your Social Security benefits are taxed.
If you have money in a 401(k) or traditional IRA, you may be able to reduce your Social Security taxes by converting your accounts to a Roth IRA. When you convert, you’ll pay taxes on the amount in the account, but your distributions will be tax-free after that.
Just as is the case with any Roth IRA, withdrawals from a Roth conversion are not considered income for the Social Security income calculation. Rosen recommends a tax projection to see if either strategy makes sense for your particular situation.
Do states tax Social Security benefits?
Above, we discussed the rules regarding federal income taxes on Social Security benefits. Depending on where you live, you may also owe state Social Security income tax.
While some states follow the same rules for federal taxation, others tax a modified amount or don’t tax Social Security at all. Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont and West Virginia collect state income tax on the Social Security benefits of at least some recipients. In the chart below, you can see the list of states that don’t tax Social Security income:
|How States Tax Social Security Income|
|State follows federal taxation practices||
|State taxes Social Security benefits with some modifications to federal taxation practices||
|State does not include Social Security benefits in its income tax calculation||
|State exempts a portion of Social Security benefits included in federal taxable income||
|State gives exemptions based on income or age||
|State has no income tax||