Whether you pay taxes on Social Security depends on your total income

You may owe federal income tax on your Social Security benefits if your combined income exceeds certain thresholds. Combined income means your adjusted gross income plus nontaxable interest plus half of your Social Security benefits. The IRS uses this formula to decide whether any of your benefits are taxable.

The thresholds are $25,000 for single filers and $32,000 for married couples filing jointly. If your combined income falls below these amounts, you owe no federal tax on your benefits. If it exceeds them, you may owe tax on up to 85 percent of your benefits, depending on how far over the threshold you go.

State taxes are separate. Some states do not tax Social Security at all. Others tax it under the same federal rules, and a few have their own thresholds. You will need to check your state's rules or ask a tax preparer about your specific situation.

Key Takeaways

  • Combined income — not Social Security alone — determines whether your benefits are taxable, and combined income includes half your benefits themselves.
  • The federal thresholds are $25,000 for single filers and $32,000 for married filing jointly; income below these amounts means no federal tax on benefits.
  • If you exceed the threshold, the IRS taxes between 50 and 85 percent of your benefits depending on how much over you go.
  • State tax rules on Social Security vary widely, so you need to check your own state's rules or work with a tax preparer.
  • The Social Security Administration does not withhold taxes automatically, so you may need to make quarterly estimated tax payments or adjust your W-4 if you have other income.

How the IRS calculates combined income

The calculation is not straightforward because it includes half your Social Security benefits as part of the income that determines whether you owe tax. Start with your adjusted gross income (wages, pensions, interest, dividends, and other income sources). Add any nontaxable interest you earned. Then add half of your total Social Security benefits for the year.

This combined total is what the IRS compares to the $25,000 or $32,000 threshold. For example, if you are single and have $20,000 in pension income, $3,000 in interest, and $18,000 in Social Security benefits, your combined income is $20,000 + $3,000 + $9,000 (half of $18,000) = $32,000. You are $7,000 over the $25,000 threshold, so some of your benefits are taxable.

How much of your benefits may be taxable

If your combined income exceeds the threshold, the IRS does not automatically tax all your benefits. Instead, it taxes the lesser of two amounts: either 50 percent of the excess over the threshold, or 50 percent of your total benefits — whichever is smaller. If your combined income is very high, you may owe tax on up to 85 percent of your benefits instead.

The exact percentage depends on how far over the threshold you go. The IRS publishes a worksheet each year to help you calculate this, and most tax software includes it. If you do your own taxes, you can find the worksheet in IRS Publication 915, which covers Social Security and railroad retirement benefits.

What counts as combined income

Combined income includes almost all money you receive, with a few exceptions. Wages, self-employment income, pensions, annuities, interest, dividends, capital gains, and rental income all count. Distributions from retirement accounts like IRAs and 401(k)s count too, whether they are required minimum distributions or withdrawals you choose to make.

Some income does not count toward combined income. Municipal bond interest is excluded. Supplemental Security Income (SSI) does not count. Veterans benefits do not count. However, most other income sources do, so if you are unsure whether something counts, ask a tax preparer or call the IRS.

Withholding and estimated taxes

The Social Security Administration does not withhold federal income tax from your benefits automatically. If you expect to owe tax, you have two options: request that the SSA withhold a percentage of your monthly benefit, or make quarterly estimated tax payments to the IRS.

To request withholding, fill out Form W-4V and send it to your local Social Security office or submit it online through your my Social Security account. You can choose to have 7, 10, 12, or 22 percent of your benefit withheld each month. If you have other income (like wages or a pension), you may be able to adjust your W-4 at that job instead to cover the tax you owe on both sources.

If you make quarterly estimated payments, you file Form 1040-ES with the IRS four times a year. This route works better if your income varies month to month or if you want more control over how much you set aside.

State tax rules on Social Security

Thirteen states do not tax Social Security benefits at all: Alaska, Florida, Illinois, Iowa, Louisiana, Mississippi, Missouri, Nevada, New Hampshire, Pennsylvania, South Dakota, Tennessee, and Texas. If you live in one of these states, you owe no state income tax on your benefits.

Most other states follow the federal rules: if your benefits are taxable under federal law, they are taxable under state law too. A few states have their own thresholds or rules. Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, and Vermont all have different rules than the federal government. You will need to check your state's tax agency website or ask a tax preparer about your state's specific rules.

Frequently Asked Questions

Can I reduce my combined income to avoid taxes on Social Security?

You can lower your combined income by reducing other sources of income, but Social Security itself counts toward the threshold. Some people delay taking Social Security or take smaller withdrawals from retirement accounts to stay under the threshold. A tax preparer or financial advisor can help you plan this if you are close to the limit.

Do I have to file a tax return if my only income is Social Security?

If Social Security is your only income and it is below the threshold, you do not have to file a federal return. However, if you have other income or if some of your benefits are taxable, you must file. Check the IRS filing requirements for your age and income level each year, as the thresholds change slightly.

What if I did not withhold taxes and now owe money?

You can still request withholding going forward using Form W-4V, or you can make estimated quarterly payments. If you owe back taxes, contact the IRS to set up a payment plan. The IRS offers several options for people who cannot pay in full, including installment agreements.

Does my spouse's Social Security count toward my combined income?

No. Each person's combined income is calculated separately. Your spouse's benefits do not count toward your threshold, and your benefits do not count toward theirs. However, if you file a joint return, the IRS looks at both of your combined incomes together to decide whether either of you owes tax.

Where do I find my Social Security income for the year?

The Social Security Administration sends Form SSA-1099 each January showing your total benefits for the previous year. You will receive it by mail or through your my Social Security account. Use this amount to calculate your combined income and determine whether you owe tax.