How Taxes Work on Social Security

March 22, 2023

You may not know it, but Social Security income is taxed! However, your tax burden isn’t simply a gross income tax, and there are unique factors that dictate your tax rate and overall tax liability.

 First, not all Social Security income is taxed. Only a portion of your benefits may be subject to tax, depending on your taxable and overall supplemental income and filing status. The amount of your Social Security benefits that are subject to tax is determined by what is known as the "combined income" formula. This formula considers your adjusted gross income, tax-exempt interest, and half of your Social Security benefits. If your combined income is below a certain threshold, none of your benefits will be taxed. If it is above the threshold, a portion of your benefits may be taxed at either 50% or 85%.

The thresholds for taxation of Social Security benefits vary depending on your filing status. For single filers, the threshold for the 50% tax rate is $25,000 and the threshold for the 85% tax rate is $34,000. For married couples filing jointly, the thresholds are $32,000 and $44,000, respectively. For married individuals filing separately, the thresholds are lower at $25,000 and $34,000.

It's important to note that the combined income formula only applies to federal taxes. Some states also tax Social Security benefits, but the rules for taxation vary from state to state. In some states, all Social Security benefits are exempt from state tax, while in others, the same combined income formula used for federal taxes is applied.

Overall, your tax burden on Social Security income will depend on your combined income, filing status, and state of residence. It's a good idea to consult with a tax professional or use tax preparation software to determine your tax liability on Social Security benefits.


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This document is for educational purposes only and should not be construed as legal or tax advice. One should consult a legal or tax professional regarding their own personal situation. Any comments regarding safe and secure investments and guaranteed income streams refer only to fixed insurance products offered by an insurance company. They do not refer in any way to securities or investment advisory products. Insurance policy applications are vetted through an underwriting process set forth by the issuing insurance company. Some applications may not be accepted based upon adverse underwriting results. Death benefit payouts are based upon the claims paying ability of the issuing insurance company. The firm providing this document is not affiliated with the Social Security Administration or any other government entity.