How Social Security benefits are taxed

Social Security benefits can be taxed by the federal government, but only once your income passes a certain point, and never all of them. The rules are in IRS Publication 915. They are easier than they look.

The test: half your benefits plus everything else

Add half of your Social Security benefits for the year to all your other income, including tax-exempt interest. Compare the total with your base amount:

• $25,000 if you are single, head of household or a qualifying surviving spouse.
• $32,000 if you are married filing jointly.
• $25,000 if you are married filing separately and lived apart from your spouse all year.

If your total is at or below the base amount, none of your benefits are taxable.

Above the base amount: up to 50%, then up to 85%

Go over the base amount and, generally, up to 50% of your benefits become taxable. Up to 85% can be taxable when half of your benefits plus all your other income is more than $34,000, or $44,000 if you are married filing jointly. It never goes above 85%.

One group skips the base amount altogether: people who are married, file separately, and lived with their spouse at any time during the year. For them, up to 85% of benefits are taxable from the first dollar of the test.

An example from the IRS

The filled-in worksheet in Publication 915 shows a single filer with $5,980 in benefits. Half of that is $2,990. Add other income and the total comes to $31,980, which is $6,980 over the $25,000 base amount. Half of that excess is $3,490. The taxable amount is the smaller of that figure and half the benefits, so $2,990 of the $5,980 is taxable.

You can run the same worksheet on your own figures with the taxable Social Security calculator.

Taxable is not the same as tax

The worksheet tells you how much of your benefit is added to your taxable income. It is not the tax you owe. That depends on the rest of your return and on your tax bracket.

Having tax taken out of your benefit

You do not have to wait for a bill at tax time. Social Security lets you have federal tax withheld from your monthly payment at 7%, 10%, 12% or 22%. The other option is to pay the IRS directly.

What this page leaves out

Publication 915 also covers a lump-sum election for benefit payments that were for an earlier year. State income tax on benefits is a separate question and depends on where you live.