- Up to 85% of your Social Security can be taxable.
- If your provisional income exceeds $25,000 as a single filing or $32,000 as a joint filing, you may owe federal income tax.
- You can pay estimated taxes on a quarterly basis, through benefit deductions, or in full with your federal tax return.
- This article has been reviewed for accuracy and clarity by: Luis Rosa, an expert on Personal Finance Insider’s tax review board.
- Check out Personal Finance Insider’s picks for the best tax software »
Taxes don’t get much easier later in life. If you throw Social Security into the mix, things can actually get pretty hairy.
The vast majority of retirees cannot survive on social security alone. The average retiree currently receiving Social Security benefits is simply $1,657 per month (the maximum for someone with their full retirement age in 2022 is $3,345 per month).
Additional income from investments and retirement savings or pensions is often needed to fund a comfortable lifestyle and pay the high costs of health care.
What is Social Security?
Social Security is a federal program that provides monthly benefits to retirees, surviving spouses and children, and the disabled. The average of 65 million Americans pay social security monthly.
The money for Social Security, as well as Medicare, comes from a tax that every working American pays. It’s a 7.65% tax on any paycheck, or a 15.3% self-employed tax that covers both the employee and employer portion. That tax is levied on the first $147,000 of an employee’s income in 2022.
So while employees pay taxes to fund the Social Security program, other people benefit by cashing a monthly check. Those benefit checks are then often taxed as income, returning some of the money to the federal government.
Is social security taxable?
Yes, Social Security can be taxable. But the proportion of benefits that is taxed depends on one’s submission status and provisional income.
There are two steps to determining whether your Social Security benefits are taxable and at what rate:
- Find your provisional income, which is equal to adjusted gross income (AGI) plus non-taxable interest plus half of your annual Social Security benefit. Couples calculate theirs by taking half of each person’s annual Social Security benefit and adding it to their combined income.
- Apply that total to the following income limits to find out how much of Social Security benefit will be taxed at the marginal tax rate:
How Do You Report Your Social Security Income On Your Federal Taxes?
Each Social Security recipient receives a benefits statement, Form SSA-1099, in January, stating the total amount of benefits received in the previous year. This includes pension, survivor’s and disability benefits.
Take that total — shown in box 5 — and report it on line 6a of Form 1040 (your federal tax return) or Form 1040-SR (an alternate tax return for people 65 and older). worksheet to help you calculate what proportion of your benefits is taxable and add the amount to your other income. More simply, you can use online tax software or consult a tax professional to crunch the numbers.
If you collect Social Security and expect to pay federal taxes on your benefits, you can make estimated quarterly payments (as an independent contractor would do) or choose to have federal taxes withheld — either 7%, 10%, 12% or 22% of your monthly benefit. You can also have additional taxes withheld from your other sources of income, such as a pension.
Social Security benefits for retirees, beneficiaries, and the disabled are considered a form of income by the IRS. But only a portion is subject to tax – 15% of your total benefit for the year is always tax-free.
If your annual income (including half of your Social Security benefits) is over $34,000, or over $44,000 if you’re married, you can expect to pay income tax on most of the benefits you receive.
If you prefer to pay taxes while on the road to avoid a hefty bill during tax season, sign up for withholding by fill in the form and return it by mail or in person to your local Social Security office.