Whether you pay taxes on Social Security depends on your total income, not just what you receive from Social Security
You may owe federal income tax on your Social Security benefits if your combined 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 — but if you have other income sources, you could end up owing tax on a portion of your benefits.
The thresholds that trigger taxation have not changed since 1984, which means more people cross them each year as wages and savings grow. Whether you actually owe tax depends on your filing status and how much money you made outside of Social Security in a given year.
Key Takeaways
- You calculate combined income by adding your wages, interest, dividends, and half your Social Security benefits together.
- Single filers with combined income over $25,000 and married filers over $32,000 may owe tax on part of their benefits.
- Up to 85 percent of your Social Security benefits can be taxed, but only if your combined income is substantially higher than the initial threshold.
- You can request that the Social Security Administration withhold taxes from your monthly payment to avoid a surprise bill at tax time.
- State taxes on Social Security benefits vary by state — some states tax them, and some do not.
How the IRS calculates combined income
Combined income is not the same as your adjusted gross income (AGI). The IRS starts with your AGI and then adds back certain deductions and half of your Social Security benefits. This means you can have a low AGI but still have combined income high enough to trigger taxation of your benefits.
For example, if you are single and have $20,000 in wages, $8,000 in interest from savings, and $18,000 in Social Security benefits, your combined income is $20,000 + $8,000 + (half of $18,000) = $37,000. Even though your wages and interest alone are below the threshold, the addition of half your benefits pushes you over it.
The IRS worksheet for calculating combined income appears in the instructions for Form 1040 each year. If you file taxes, you can work through it yourself, or a tax preparer can do it for you.
The two income thresholds and how much gets taxed
The first threshold is $25,000 for single filers and $32,000 for married couples filing jointly. If your combined income is below these amounts, you owe no tax on your Social Security benefits.
If your combined income exceeds the first threshold but stays below the second threshold — $34,000 for single filers and $44,000 for married couples filing jointly — you may owe tax on up to 50 percent of your benefits. The exact amount depends on how far above the first threshold you are.
If your combined income exceeds the second threshold, you may owe tax on up to 85 percent of your benefits. Again, the exact percentage depends on your specific income. The IRS worksheet walks you through the calculation, and it is not a flat percentage — the more you earn above the second threshold, the more of your benefits become taxable, up to that 85 percent ceiling.
What counts toward combined income
Combined income includes wages from work, self-employment income, interest from bank accounts and bonds, dividends from stocks, capital gains from selling investments, rental income, and pension income. It also includes distributions from retirement accounts like IRAs and 401(k)s, whether or not you needed the money.
Some income does not count toward combined income. Tax-exempt interest (such as interest from municipal bonds) does count, even though it is not taxable. However, certain types of income, like workers' compensation or Supplemental Security Income (SSI), do not count.
If you are married and file separately, the thresholds are much lower — $0 — meaning almost any combined income will result in taxation of your benefits. This is why married couples almost always file jointly if one or both receive Social Security.
How to reduce the amount of tax you owe
If you know you will owe tax on your benefits, you can ask the Social Security Administration to withhold federal income tax from your monthly payment. You do this by completing Form W-4V and sending it to your local Social Security office or mailing it to the address on the form. The withholding rate you choose (7, 10, 12, or 22 percent) is applied to your benefit amount each month.
Withholding does not reduce the amount of your benefits — it only sets aside money for taxes. The full benefit amount is still paid to you, minus the withholding. This approach can help you avoid owing a large sum when you file your tax return.
Another way to manage tax liability is to time withdrawals from retirement accounts strategically. If you have control over when you take money from an IRA or 401(k), taking it in a year when your other income is lower can keep your combined income below the threshold. This requires planning and may involve consulting a tax professional.
State taxes on Social Security benefits
Whether your state taxes Social Security benefits depends on where you live. Most states do not tax Social Security benefits at all. However, Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, and Vermont do tax some or all of them, though most of these states offer exemptions or deductions that reduce or eliminate the tax for many retirees.
The rules vary by state. Some states use the same federal thresholds; others use different ones. Some states tax only benefits above a certain age or income level. If you live in a state that taxes Social Security, contact your state tax authority or a tax preparer familiar with your state's rules to understand your specific situation.
What to do if you receive a notice from the IRS
If the IRS sends you a notice saying you owe tax on your Social Security benefits, do not ignore it. The notice will explain what the IRS believes you owe and give you a important date to respond. You have the right to dispute the calculation if you believe it is wrong.
If you cannot pay the full amount, you can set up a payment plan with the IRS. You can also request an installment agreement, which allows you to pay over time. The IRS website (irs.gov) has information about payment options, or you can call the IRS at 1-800-829-1040.
If your income situation changes — for example, you stop working or your investment income drops — your tax liability on Social Security benefits may decrease in future years. Keep records of your income and benefits so you can show the IRS if your circumstances change.
Frequently Asked Questions
Can I avoid paying taxes on Social Security by not working?
Not necessarily. Even if you have no wages, you can owe tax on your benefits if you have other income like interest, dividends, or retirement account withdrawals. The threshold is based on combined income, not wages alone.
Does Medicare premium withholding count toward my combined income?
No. The amount withheld from your Social Security check to pay Medicare premiums does not reduce your combined income for tax purposes. Your combined income is calculated before Medicare withholding is applied.
What if I made a mistake on my tax return and reported the wrong amount of Social Security income?
You can file an amended return using Form 1040-X. The IRS will recalculate your tax liability based on the corrected information. If you overpaid, you will receive a refund; if you underpaid, you will owe the difference.
Do I have to file a tax return if my only income is Social Security?
Generally, no — if Social Security is your only income and it is below the filing threshold for your age and filing status, you do not have to file. However, if you have other income or if you want to claim a refundable tax credit, filing may benefit you even if you are not required to.
Will my tax bill on Social Security benefits change if I delay claiming benefits?
Delaying benefits increases the amount you receive each month, which increases your combined income once you do claim. This could push you into a higher tax bracket on your benefits. However, the higher monthly payment may offset the additional tax over your lifetime — this depends on your other income sources and how long you live.