January 21, 2022

Here’s What Is And Isn’t Taxed On Your Social Security Benefit

Senior adult couple goes over papers in their home with agent.

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While tax situations are different for everyone, some individuals will be required to: pay taxes on their Social Security income. The Social Security Administration (SSA) states that such a distribution tax usually only occurs if you have other substantial income in addition to your distributions. Examples of other significant income include regular wages, independent income, interest, dividends and other taxable income that must be stated on your tax return.

To see: Future of Social Security: Why experts say not to worry, but still plan for less ‘substantial’ payments
Find: How to Increase Your Social Security Benefit With Supplemental Security Income?

The SSA reports that you pay taxes on only 85% of your Social Security benefits under IRS rules. The tax rules apply if you:

  • file a federal tax return as an “individual” and your combined income is:
    • between $25,000 and $34,000 – in this case, you may be required to pay income tax on up to 50 percent of your distributions.
    • over $34,000 – in this case, up to 85 percent of your benefits may be taxable.
  • filing a joint tax return, and you and your spouse together have an income that:
    • between $32,000 and $44,000 – if true, you may be required to pay income tax on up to 50 percent of your benefits.
    • over $44,000 – if it does, up to 85 percent of your benefits could be taxable.
  • are married and file a separate tax return – in such a circumstance you are likely to pay tax on your distributions.

Your combined income is calculated by adding non-taxable interest and half of your Social Security benefits to your adjusted gross income, for the purposes of the rules above.

Each January, you will receive your Social Security Benefit Statement, Form SSA-1099, which will show you how much benefit you received the year before. This form is needed when you file your federal income tax return later in the year to find out if your benefits are taxable. This form is now available online through the mySocialSecurity website. By signing up and creating an account, you can view this information online without having to wait for it to be emailed to your home.

To learn: 20 Best Places to Live With Just a Social Security Check
To discover: Social Security Alternatives That Will Bring Retirement Income

If you already know that you will have to pay taxes on your Social Security benefits, it is possible to automatically deduct the taxes from your benefits. This can be a smart way to make sure taxes are handled automatically, making it easier for you to file your tax return.

If you don’t meet the above requirements, chances are you don’t have to worry about your benefits are taxed. However, as always, you can find out for yourself by logging into your personal account — or by contacting the nearest social security agency.

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About the author

Georgina Tzanetos is a former financial advisor who studied post-industrial capitalist structures at New York University. She has eight years of experience in concentrations in asset management, portfolio management, private client banking and investment research. Georgina has written for Investopedia and WallStreetMojo.

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