Whether you pay taxes on Social Security depends on your other income
You may owe federal income tax on your Social Security benefits if your total income exceeds a certain threshold. The IRS calls this "combined income," and it includes your wages, interest, dividends, and half of your Social Security benefits added together. For most people, Social Security is not taxed at all. For others, up to 85 percent of benefits can be subject to tax.
The thresholds that trigger taxation are the same whether you file single or married filing jointly, but married couples filing separately face much higher taxation rates. These thresholds have not changed since 1984, so more people are affected now than when the rule began.
Key Takeaways
- You owe federal tax on Social Security only if your combined income (wages plus half your benefits) exceeds $25,000 for single filers or $32,000 for married couples filing jointly.
- If you exceed the first threshold, up to 50 percent of your benefits become taxable; if you exceed the second threshold ($34,000 single or $44,000 married), up to 85 percent becomes taxable.
- State taxes on Social Security vary widely — some states tax benefits the same way the federal government does, while others do not tax them at all.
- You can reduce your tax burden by managing when you claim benefits, where you live, and whether you work while receiving benefits.
The two income thresholds that determine your tax bill
The IRS uses two thresholds to calculate how much of your benefit is taxable. Your combined income is the sum of your adjusted gross income, nontaxable interest, and half of your Social Security benefits.
If your combined income is between $25,000 and $34,000 (single) or $32,000 and $44,000 (married filing jointly), you may owe tax on up to 50 percent of your benefits. If your combined income exceeds $34,000 (single) or $44,000 (married filing jointly), you may owe tax on up to 85 percent of your benefits.
The actual amount taxed is calculated using a formula, not a flat percentage. The IRS worksheet in Publication 915 walks through the calculation, but a tax professional can do this for you. Many people find it simpler to have a preparer handle it than to work through the formula themselves.
How to calculate your combined income
Start with your adjusted gross income (AGI) — the number on line 11 of your Form 1040. Add any nontaxable interest you received, such as interest from municipal bonds. Then add half of your Social Security benefits.
For example: if your AGI is $20,000, you have $500 in nontaxable interest, and you received $18,000 in Social Security, your combined income is $20,000 + $500 + $9,000 = $29,500. This exceeds the $25,000 threshold for single filers, so some of your benefits are taxable.
If you are married filing jointly and your spouse also receives Social Security, add both spouses' benefits to the calculation. If you are married filing separately, the threshold drops to $0, meaning almost all of your benefits become taxable — this is why married couples are strongly advised to file jointly if possible.
State taxes on Social Security benefits
Thirteen states tax Social Security benefits to some degree: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, and West Virginia. The rules vary by state.
Some states use the same federal thresholds and percentages. Others have their own thresholds or tax only benefits above a certain income level. A few states exempt benefits for residents over a certain age, typically 55 or 59½. Colorado, for instance, taxes benefits only for people with incomes above $24,000 (single) or $32,000 (married), and only if they are under 55.
If you live in a state that taxes benefits, contact your state tax authority or a tax preparer familiar with your state's rules. The rules change occasionally, and what applied last year may not explore this year.
Ways to reduce the tax on your benefits
Delaying when you claim Social Security can lower your combined income in early retirement years. If you are still working and have not yet claimed benefits, your work income may push you over the threshold. Waiting until you stop working, or until your work income drops, can reduce the amount of benefits that are taxed.
Where you live affects your tax bill if you live in a state that taxes benefits. Moving to a state with no Social Security tax can save money, though this is a major decision that involves many other factors beyond taxes.
Reducing other income sources can also help. If you have a choice about when to take distributions from retirement accounts, taking them in years when your Social Security has not yet started can keep your combined income lower. Roth conversions, charitable giving, and other tax strategies may also reduce your combined income, though these work best with a tax professional's guidance.
What to do if you owe tax on your benefits
If you owe federal income tax on your Social Security benefits, you can pay it in several ways. You can have taxes withheld from your benefit payment, make quarterly estimated tax payments, or pay the full amount when you file your return.
To have taxes withheld, complete 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 benefit withheld. Many people choose withholding to avoid a large tax bill at filing time.
If you do not have taxes withheld and owe more than $1,000 when you file, you may owe a penalty for underpayment of estimated tax. A tax preparer can tell you whether you need to make quarterly payments or whether withholding from your benefit is enough.
Frequently Asked Questions
Do I have to file a tax return if I only receive Social Security?
Not necessarily. If Social Security is your only income and it is below the standard deduction for your filing status, you do not have to file. However, if you have other income or if some of your benefits are taxable, you may need to file. The IRS has a tool on its website to help you determine whether you must file.
What if I work and receive Social Security at the same time?
Your work income counts toward your combined income, which may push you over the threshold and make your benefits taxable. Additionally, if you have not reached full retirement age, Social Security reduces your benefit by $1 for every $2 you earn above $23,400 (in 2024). Once you reach full retirement age, this earnings limit no longer applies.
Can I reduce my combined income to avoid taxation?
Some strategies can lower your combined income, such as delaying when you claim benefits, timing retirement account withdrawals, or using tax-advantaged giving. A tax professional can review your specific situation and suggest approaches that work for you.
Do I owe tax on my spouse's Social Security benefits?
No. Each person's benefits are taxed based on their own combined income. However, if you file jointly, your spouse's income and benefits are included in the household combined income calculation, which may affect how much of your own benefits are taxed.
What if I disagree with the amount of tax withheld from my benefits?
You can change your withholding at any time by submitting a new Form W-4V to Social Security. You can also contact a tax professional to review whether your withholding is correct for your situation.