Do you pay taxes on Social Security income? For that matter, what is Social Security tax (SS tax)? You’ve probably had those questions if you’re thinking about retirement soon. It’s good that you’re asking: it will help you to plan.

The truth is that most people who receive Social Security do have to pay taxes on their benefits. However, whether you will have to pay SS tax depends on your income level, more precisely your combined income. Every January, you’ll receive a copy of Form SSA-1099. This form is your Social Security Benefit Statement, and it will show you how much you received in benefits the previous year.

You can calculate your combined income by adding one half of your Social Security benefits from your Form SSA-1099 to your adjusted gross income (income after above-the-line deductions) and nontaxable interest. Once you have that number, you can figure out whether or not you will be taxed on your Social Security income. If you are married but opt to file a separate tax return, you will probably need to pay taxes on your Social Security benefits.

Calculating your Social Security income tax

Your Social Security tax rate will depend on your combined income: your Social Security benefits, as well as other income from part-time work, 401(k) distributions, and rental properties. Once you have that number, you can figure out which bracket you are in.

If you have less than $25,000 in combined income and are filing as an individual, you will not be taxed on your Social Security income. Couples filing together with a combined income of less than $32,000 will also not need to pay taxes on their Social Security benefits. According to the Social Security Administration, if you file an individual tax return with a combined income between $25,000 and $34,000, you will need to pay tax on up to 50% of your benefits.

For an income above $34,000, up to 85% of your benefits are included in your taxes. For couples filing a joint return, a combined income of $32,000 to $44,000 means up to 50% of benefits may be taxable. With a combined income of over $44,000, up to 85% of benefits may be taxable. It’s important to note that both of those categories are maximum percentages. Whether or not you’ll have to pay the maximum percentage takes a little more calculation.

Let’s suppose you are in the 50% category, either as an individual or together with your spouse filing jointly. What will your Social Security tax rate be? You’ll pay either 1) half of your benefits (the 50%), or 2) half of the difference between your combined income and the base amount, whichever one is lower. This also means that at least 50%, and maybe more, of your benefits will not be subject to taxation.

If you’re looking at up to 85% of your benefits being taxable, the formula is a bit more complicated. Fortunately, the IRS offers a worksheet to calculate how much you will need to pay. Of course, this also means that at least 15%, and maybe more, of your benefits will not be taxed.

How to file Social Security income on your federal taxes

If your Social Security is taxable, it’s usually easy to file it on your federal taxes once you have the amount you need to pay in SS tax. On your Form SSA-1099, the total amount of your benefits will be listed in box 3. Take that amount and write it on line 5a of your 1040. Now, write the taxable amount of your Social Security benefits on line 5b.

With your taxes filed, you have two options for paying. One is to fill out Form W-4V, Voluntary Withholding Request. The form will ask for your personal information and for you to complete 7 lines. You can choose to have 7%, 10%, 12%, or 22% of your monthly Social Security benefits withheld.

The other way is to file estimated quarterly payments. This way is admittedly more precise, but it will take a bit more work throughout the year.

Are there state taxes on Social Security benefits?

In addition to federal taxes, you may have to pay state taxes on your Social Security income. Whether or not this is the case will depend on what state you live in. A total of 13 states have at least some Social Security taxes.

Of these states, North Dakota, Vermont, and West Virginia all have the same rules as the federal government. The other tenstates are Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, and Utah. These states mostly follow the federal government’s rules but are a bit more lenient. They offer some deductions based on age and income.

It’s a good idea to talk to an accountant or financial planner if you live in any of the 13 states that tax Social Security income. The other 37 states and the District of Columbia do not tax Social Security at all.

Bottom Line

You’ll most likely have to pay some taxes on your Social Security income. However, a little careful planning goes a long way toward helping to protect your retirement.

A Certified Financial Planner can help you make the most of your financial options. Depending on your situation, there may be strategies to limit the amount you will have to pay in taxes. Talk to a Certified Financial Planner today.

Frequently Asked Questions

Is Social Security income considered taxable?

Yes, your Social Security income can be taxable, depending on your total annual income and filing status. Not everyone will pay taxes on their Social Security benefits, but many people with additional income will find that a portion of their benefits is subject to federal income tax.

How do I know if my Social Security benefits are taxable?

To determine if your Social Security benefits are taxable, you’ll need to calculate your combined income. Combined income is the sum of your adjusted gross income, nontaxable interest, and half of your Social Security benefits. If this total exceeds certain thresholds, your benefits may be taxable.

Does the state I live in tax Social Security benefits?

Some states also tax Social Security benefits, often with their own set of rules and exemptions. Currently, the majority of states do not tax Social Security benefits, but it's important to check the regulations specific to your state.

How can I reduce taxes on my Social Security benefits?

You might reduce taxes on your benefits by:

• Managing your other retirement income sources to keep your combined income below taxable thresholds.
• Making contributions to tax-deferred retirement accounts, which could lower your adjusted gross income.
• Spreading out income over several years to avoid large taxable amounts in a single year.

Can I have federal taxes withheld from my Social Security benefits?

Yes, you can request voluntary tax withholding from your Social Security benefits by filling out IRS Form W-4V, Voluntary Withholding Request, and submitting it to the Social Security Administration.

What should I do if I didn’t have taxes withheld and now owe money?

If you find you owe taxes on your Social Security benefits and didn’t have withholding or didn't withhold enough, you may need to make quarterly estimated tax payments to the IRS to avoid penalties.

Where can I get help if I’m unsure about the taxability of my benefits?

For personalized advice, consider consulting with a tax professional or financial advisor. They can provide guidance based on your specific financial situation. Additionally, the IRS website and the Social Security Administration's website offer resources and tools to help calculate the taxable portion of your benefits.

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