Millions of Americans receive Social Security benefits each month, and many struggle to survive on those benefits alone. If you are wondering how much Social Security pays, the average Social Security check in 2024 was only about $1,927 monthly, which is not a significant income. Income taxes on those Social Security benefits could create an even more significant burden for those individuals.
So, do you have to pay taxes on your Social Security payments? The answer depends on your total income during the year, and your income also affects what percentage of your benefits are taxable. If you receive Social Security benefits and wonder whether they are taxable, keep reading as we give you all the details you need.
Is Social Security Income Taxable?
Many people wonder, “Do you pay taxes on Social Security?” Yes, Social Security income is taxable in many situations, and most Americans pay taxes on at least a portion of their Social Security benefits. Taxpayers must report Social Security income on their tax return to the IRS. There are three possibilities for taxing Social Security benefits, and there is an IRS guide regarding Social Security benefits.
1) No Tax on Social Security
First, you might not owe taxes on your benefits if your adjusted gross income (AGI) is low enough. However, the threshold is pretty low, and most people owe taxes on some of their benefits. We will discuss the specific calculation of this tax in greater detail in the next section.
2) Taxed on 50% of your Social Security
The next possibility is that you could owe taxes on half of your Social Security benefits. This means you would pay taxes on 50% of your benefit amount, while the other 50% would be tax-free.
3) Taxed on 85% of your Social Security
Finally, you will owe taxes on 85% of your Social Security benefits if your income is higher. You are never required to pay federal income tax on the final 15% of your benefits, regardless of your total income. That final 15% remains untaxed at the federal level, although you could still owe state taxes.
It would help if you also understood that Social Security benefits are taxed based on income, not age. Some people believe that Social Security is no longer taxed once you reach a certain age, but that is untrue.
KEY TAKEAWAYS
- In many instances, Social Security income is subject to Federal income tax. However, there are limits on how much of your Social Security will be taxed. The max is 85% of your Social Security income.
- In addition to potentially being taxed on Social Security retirement benefits, any spousal, survivor, or SSDI benefits you receive may also be subject to Federal taxes.
- Most states do not tax your Social Security benefits, but a few exceptions exist. Depending on where you live, you may owe state taxes on a portion of your benefits.
Calculating Income Taxes On Social Security Benefits
So, how is Social Security taxed? The answer depends on performing a calculation of your income. The calculation is not overly complex, although it does require a few steps. Also, the method and brackets differ slightly for an individual versus a married couple. Below, we will outline the steps to calculate the tax on your benefits in each situation.
Individuals
First, you must calculate what the IRS calls your “combined income.” Note that combined retirement income refers to the sum of various income sources, not income added between spouses.
Combined Income
To get your combined income, you will need to do the following.
- You should add your adjusted gross income, nontaxable interest income, and half of your Social Security benefits.
Your adjusted gross income typically includes income from several sources, like a job, withdrawals from retirement accounts, pensions, annuity payments, or other sources.
- Even though your nontaxable interest income is not taxed, you must include it in this calculation.
Finally, you will add half of your Social Security benefits. You can get this number from Form SSA-1099, which is mailed to all Social Security beneficiaries in January. This form shows the total amount of benefits received during the previous year.
Examine Individual Tax Bracket
Once you have calculated your combined income, you must examine the brackets for individual taxes. If your combined income is less than $25,000 for the year, then none of your Social Security benefits will be considered taxable. You won’t owe any taxes on those benefits.
If your combined income is between $25,000 and $34,000, you will owe taxes on 50% of your benefits. Half of your benefits will be included in your taxable income for the tax year. Individual tax filers with a combined income of more than $34,000 will owe taxes on 85% of the benefits they receive from the Social Security Administration.
Remember that the final 15% of your benefit amount is never taxed. These same rules and amounts apply to those filing taxes as a head of household.
Married Couples
The calculation is the same for married couples filing a joint return, although the brackets are different. For those with joint filing status, you must again calculate your total combined income. Again, this includes your adjusted gross income, tax-exempt interest, and half of your Social Security benefits. This time, you will need to add those items from both spouses.
Examine Couples Tax Bracket
Once you have your combined income, you must check the brackets to determine how much your Social Security is taxable. For married couples with a combined income of less than $32,000, no tax will be due on any of their Social Security benefits; for couples with a combined income of between $32,000 and $44,000, half of their Social Security benefits will be taxed. Lastly, for those with a combined income of more than $44,000, 85% of your benefits will be taxed.
Amount To Be Taxed
Remember that these calculations only tell you how much of your benefit payments will be taxed. This amount will be included in your taxable income on your income tax return. This calculation does not tell you how much tax you will owe on your benefits. The amount of tax that you owe will depend on your overall tax bracket for the year. You should also know that Railroad Retirement benefits are generally treated like Social Security benefits for tax purposes.
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How To Withhold Taxes From Your Social Security Check
If you have to pay taxes on your Social Security benefits, you likely don’t want to be hit with a big tax bill at the end of the year. For most people, this is not an issue during their working years. Your employer automatically withholds all the proper payroll taxes from your check. For self-employed individuals, you must pay quarterly taxes to the IRS.
However, income taxes are not automatically withheld from your Social Security check each month. Remember how Social Security works? You pay taxes during your working years and receive benefits each month upon retirement. However, no income taxes are withheld from those monthly benefit payments. So, is there a way to have these taxes withheld from your check so that you aren’t stuck with a hefty bill at the end of the year? The answer is yes!
Complete Form W4-V
You must complete Form W4-V and file it with the Social Security Administration. This is the Voluntary Withholding Request form, notifying the Social Security Administration to begin withholding taxes from your benefits. You may choose to have taxes withheld at a few different rates. Your options include 7%, 10%, 12%, and 22% tax rates. You should select the percentage that works best for your financial situation. Consider consulting with a tax professional if you have any questions about which amount should be withheld. Remember that Medicare premiums will most likely be withheld from your Social Security check when planning your monthly budget.
Estimated Taxes
Finally, there is another option for paying taxes throughout the year. You could also file and pay estimated quarterly taxes. This is the same way self-employed individuals pay their taxes each year. However, this method is a little more complicated and requires attention every quarter. Most people find it much easier to file the withholding request with the SSA, allowing them to withhold taxes from each check automatically.
Taxes On Other Social Security Benefits
We have already discussed whether retirees need to pay income tax on their Social Security retirement benefits, but what about other Social Security benefits? Are taxes due on disability benefits or SSI benefits? We will discuss the types of Social Security benefits here and whether you must include those on your federal tax return.
Spousal Benefits
Social Security spousal benefits can be taxable, depending on your total income. You are probably married to the primary beneficiary if you receive spousal benefits. In that case, you probably have a “married filing jointly” tax status. To determine whether your benefits are taxable, you must perform the same calculation as previously mentioned in this article.
First, you must find your total combined income by adding your adjusted gross income, tax-exempt interest, and half of your Social Security benefits. If this number is less than $32,000, you will not owe taxes on your spousal benefits or your spouse’s primary retirement benefits. If the sum is between $32,000 and $44,000, you will owe taxes on half of your benefits. Finally, if you have a combined income of over $44,000, you must pay taxes on 85% of your benefits.
Remember that it is possible to receive spousal benefits from an ex-spouse’s work record so that an unmarried individual might be receiving spousal benefits. For an individual, the calculation works the same way. If your combined income is below $25,000, you will owe no tax on your spousal benefits. For a combined income between $25,000 and $34,000, taxes will be due on half of your spousal benefits. Finally, you will be taxed on 85% of your spousal benefits if your combined income is more than $34,000.
Survivor Benefits
When an individual passes away, survivor benefits are usually paid to either a surviving spouse or a dependent child of the deceased. Any survivor benefits paid to children are rarely taxed. No tax liability exists on these benefits because children seldom have any other income. The combined income of the child is almost always below the $25,000 threshold, so they will not owe taxes on their survivor benefits. If a parent or guardian receives the payments on behalf of a child, that person does not need to report the income on their tax return.
Survivor benefits paid to a surviving spouse follow the same tax rules as other Social Security payments, like individual retirement benefits. If the surviving spouse has an income between $25,000 and $34,000, then taxes must be paid on half of the survivor benefits. If the income exceeds $34,000, the surviving spouse must pay taxes on 85% of the survivor benefits.
Social Security Disability Benefits
So, is Social Security disability taxable? We will sound like a broken record, but disability benefits can be taxable depending on the beneficiary’s total income. The rules for the taxability of Social Security disability benefits are the same as those regarding retirement benefits. Currently, the thresholds are the same. Some taxes will be due if an individual’s combined income is more than $25,000. Likewise, married couples with a combined income of more than $32,000 will owe taxes on their disability benefits.
Supplemental Security Income (SSI) Benefits
The Internal Revenue Service applies different rules to SSI benefits. Remember that SSI is a needs-based financial assistance program. You do not need a work history to qualify for the program, and you are not required to pay any Social Security taxes to receive SSI benefits.
The SSI program is available to those age 65 and older, those who are blind, or those who are unable to work due to a disability. No federal taxes are ever due on SSI payments. SSI benefits receive a complete exemption from the IRS. Since you must have limited income and resources to qualify for SSI, your income will never be high enough to require taxation.
TIP
A Roth IRA or Roth 401k is an excellent tool for minimizing potential taxes on Social Security income. All withdrawals from a Roth account are excluded from your taxable income calculation.
State Taxes On Social Security Benefits
So far, we have only discussed federal taxes on your Social Security income. So, what about state income taxes on that income? States follow three main themes regarding the taxation of Social Security benefits.
Most states do not tax Social Security benefits, regardless of your overall income. A couple of states follow the same rules as federal taxes. Those states use the same formula for determining how much of your Social Security benefit is taxable, which will be taxed at the state income tax rate. Finally, the remaining states partially tax your benefits with exemptions for certain income levels and ages. Here is how those categories break down.
| State Taxing of Social Security Benefits | |
|---|---|
|
Taxed According to Federal Rules |
Minnesota, Utah |
|
Partially Taxed (Exemptions for Income and Age) |
Colorado, Connecticut, Kansas, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Vermont, West Virginia |
|
No State Tax on Social Security Benefits |
Alabama, Alaska, Arizona, Arkansas, California, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Nevada, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Virginia, Washington, Wisconsin, Wyoming |
Reducing Your Taxes On Social Security Benefits
Now that you know how Social Security benefits are taxed and when you will owe taxes on them, you are likely trying to think of ways to reduce your tax obligation. There are ways that you can reduce the amount of tax you will be required to pay on your Social Security benefits. Here are three of the most common methods.
Utilize Roth Retirement Accounts
A Roth IRA or Roth 401k can be an excellent method for reducing how much money you’ll pay in taxes when you start receiving Social Security benefits. Remember that money placed into a Roth account goes into the account on an after-tax basis. This means you pay taxes on that money during the year it is earned and not when the withdrawal occurs. Therefore, withdrawals from a Roth account are not included in your taxable income calculation when determining how much tax will be due on your Social Security benefits.
If you are 59 1/2 or older and have had the money in a Roth account for five years or more, the funds will not be taxed when withdrawn. Utilizing a Roth account could save you a lot of tax dollars over the years after you start receiving your Social Security benefits. Many people leverage a combination of Roth and traditional IRAs to achieve their financial goals.
Purchase An Annuity
A qualified longevity annuity contract (QLAC) is a particular type of annuity that can help save money on your taxes. These annuities can be purchased with money from a qualified retirement plan, and they do not follow the same required minimum distribution rules as most retirement accounts. You can defer distributions on a QLAC to age 85. Delaying the payout from the annuity will lower your income during the initial years after you start to receive Social Security. This means you will owe less tax on your Social Security benefits during these years.
Take Retirement Distributions Early
Instead of pushing distributions later, another method for saving money on taxes is to take these distributions earlier. Most retirement accounts allow for distributions without a penalty starting at age 59 1/2. You can wait until age 70 to start your Social Security benefits, so there is a ten-year period during which you can take distributions from your retirement account without any effect on the taxation of your Social Security benefits.
The Bottom Line
When you reach retirement age and start your Social Security benefits, you might wonder, “Is Social Security taxed?” The answer is yes, but not always. Federal taxes might be due on up to 85% of your benefits, and whether or not you pay taxes on those benefits depends on your total income.
Most states do not tax Social Security benefits, but a few states levy an income tax on your benefits. There are a few strategies that you can use to reduce the taxes you will pay on Social Security benefits, and those include Roth accounts, annuities, and early distributions from retirement accounts.
Frequently Asked Questions
The amount of your taxable Social Security income depends on your total income. Up to 85% of your Social Security income might be taxable. The final 15% of this income is never taxed.
For an individual with a combined income of less than $25,000, none of their Social Security income will be taxed. Half of their Social Security benefits will be taxable if their combined income is between $25,000 and $34,000. Finally, if their combined income is above $34,000, 85% of their benefits will be taxed.
So, are Social Security benefits taxable regardless of your age? Yes, Social Security payments can be taxed at any age. The taxability of your Social Security benefits depends on your total income and not your age.
Many people ask, “At what age do you stop paying taxes on Social Security?” The answer is never. You could be 100 years old and still owe taxes on your Social Security benefits if your income exceeds the threshold. There are a few states that allow state tax exemptions based on age. However, most states do not tax Social Security benefits at all anyway.
The only way to avoid paying taxes on Social Security is to keep your total combined income below the lower threshold. This means an individual will need a combined income of less than $25,000 for the year. There are different ways of lowering your taxable income. Some of those ways include utilizing a Roth account, taking early distributions from retirement accounts, and using qualified annuities.
The maximum amount of your Social Security benefit which will be taxed is 85%. The IRS never taxes 15% of your Social Security benefit. Regarding state taxes, most states do not tax Social Security benefits. However, some states levy income taxes on Social Security benefits, and the taxable amount will depend on your income and age.
Almost no one is exempt from paying Social Security tax. The 6.2% payroll tax for Social Security has very few exemptions. Only a few religious organizations and non-citizens can opt out of paying this tax.
When it comes to paying income tax on your Social Security benefits, many people might not owe taxes on those. If you have a combined income of less than $25,000, you will not owe income tax on your Social Security benefits. For married couples, that threshold rises to $32,000.
You can find a Social Security Administration office near you by using our SSA office locator and searching for your closest location.
