Whether your Social Security benefits are taxed depends on your other income

Social Security benefits are not automatically taxable. Whether you owe federal income tax on them depends on how much other income you have — specifically, your "combined income," which is a formula the IRS uses. If your combined income stays below a certain threshold, you pay no tax on your benefits. If it goes above that threshold, you may owe tax on part of your benefits.

The thresholds are the same whether you are single or married filing jointly, and they have not changed since 1984. This means that as your other income grows over time, you are more likely to hit the threshold and owe tax on benefits you did not owe tax on before.

Key Takeaways

  • Combined income is the sum of your adjusted gross income, nontaxable interest, and half of your Social Security benefits — not your total income.
  • If your combined income is below $25,000 (single) or $32,000 (married filing jointly), you owe no federal tax on your benefits.
  • If your combined income is above those thresholds, you may owe tax on up to 85 percent of your benefits, depending on how far above the threshold you are.
  • Some states tax Social Security benefits and some do not, so check your state's rules separately.
  • Your Social Security statement shows your estimated benefits, but the IRS will calculate what you actually owe based on your tax return each year.

How to calculate your combined income

Combined income is not the same as your total income. It is a specific formula: your adjusted gross income (the number at the bottom of your 1040 form before you claim the standard deduction) plus any nontaxable interest (such as interest from municipal bonds) plus half of your Social Security benefits.

For example, suppose you receive $20,000 in Social Security benefits and have $15,000 in adjusted gross income from a part-time job. Half your benefits is $10,000. Your combined income is $15,000 + $10,000 = $25,000. If you are single, you are exactly at the threshold and owe no tax. If you had $16,000 in adjusted gross income instead, your combined income would be $26,000, and you would owe tax on some of your benefits.

The reason the formula includes half your benefits is technical, but the practical effect is that it counts your benefits as income for tax purposes without counting them twice.

The two income thresholds and what they mean

The IRS uses two thresholds. The first is $25,000 for single filers and $32,000 for married couples filing jointly. If your combined income is at or below this threshold, you owe no federal tax on your benefits.

The second threshold is $34,000 for single filers and $44,000 for married couples filing jointly. If your combined income is between the first and second threshold, you may owe tax on up to 50 percent of your benefits. If your combined income is above the second threshold, you may owe tax on up to 85 percent of your benefits.

The exact amount of tax depends on how far above the threshold you are. The IRS worksheet on Form 1040 or the Social Security Administration's online calculator will show you the precise amount. Many tax software programs also calculate this automatically when you enter your Social Security income.

What counts as income for this calculation

Adjusted gross income includes wages, self-employment income, pensions, interest, dividends, capital gains, and distributions from retirement accounts like IRAs or 401(k)s. It does not include the standard deduction or itemized deductions.

Nontaxable interest — the other piece of the formula — is mainly interest from municipal bonds. Most people do not have this, but if you do, it counts toward your combined income even though you do not pay federal tax on it directly.

Some income does not count. Supplemental Security Income (SSI) does not count. Veterans benefits do not count. Workers' compensation does not count. Gifts and inheritances do not count. The key is whether the IRS counts it as income on your tax return.

State taxes on Social Security benefits

Thirteen states tax Social Security benefits: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, and West Virginia. The rules vary by state — some tax all benefits, some tax only benefits above a certain income level, and some offer exemptions for people over a certain age.

If you live in one of these states, you will need to check your state's tax rules separately. Your state tax return may have its own worksheet or calculator. The Social Security Administration's website has a state-by-state breakdown, and your state revenue department can answer questions about your specific situation.

What to do if you think you will owe tax on your benefits

If you expect your combined income to be above the threshold, you have two main options: pay estimated quarterly taxes or have taxes withheld from your benefits.

To have taxes withheld from your benefits, you fill out Form W-4V and send it to your local Social Security office. You can choose to have 7, 10, 12, or 22 percent of your benefits withheld. This is simpler than calculating estimated taxes yourself, and it happens automatically each month.

If you prefer to pay estimated taxes quarterly instead, you use Form 1040-ES. This is more complicated and requires you to predict your income for the year, but it gives you more control over how much you pay and when.

How to report your benefits on your tax return

Social Security sends you a Form SSA-1099 each January showing how much you received in the previous year. You report this amount on your tax return, and the IRS calculates whether any of it is taxable based on your combined income.

If none of your benefits are taxable, you still report the full amount on your return — you just do not include any of it in your taxable income. If some of your benefits are taxable, the IRS worksheet tells you how much to include.

You do not have to do this calculation yourself. Tax software and tax preparers can do it for you. If you use the IRS Free File program (available to people with income below a certain level), the software will calculate this automatically.

Frequently Asked Questions

Do I have to pay tax if I am still working and receiving benefits?

Not automatically. It depends on your combined income using the formula above. Wages from work count as adjusted gross income, so they do count toward the threshold. But if your total combined income stays below $25,000 (single) or $32,000 (married), you owe no tax on your benefits even if you are working.

What if I receive benefits for only part of the year?

Your Form SSA-1099 will show only the benefits you actually received. You use that amount to calculate your combined income. If you started benefits partway through the year, your combined income may be lower than it would be in future years when you receive a full year of benefits.

Can I reduce my combined income to avoid taxes on my benefits?

Not easily. The main way to lower combined income is to lower your adjusted gross income — for example, by contributing to a traditional IRA or reducing self-employment income. Roth IRA contributions do not lower adjusted gross income, so they do not help. Talk to a tax preparer about whether any of these strategies make sense for your situation.

What if I disagree with the amount of tax the IRS says I owe?

Double-check the calculation using the IRS worksheet or the Social Security Administration's online calculator. Make sure you used the correct threshold for your filing status and that you calculated combined income correctly. If you still disagree, you can file Form 1040-X (amended return) with a written explanation, or contact the IRS directly.

Do I owe tax on benefits I received years ago but did not report?

If you did not report taxable benefits in previous years, you may owe back taxes plus interest and penalties. The IRS can go back three years without special reason. Contact a tax preparer or the IRS to discuss your options — there may be relief available depending on your situation.