Whether your Social Security is taxed depends on your other income
Social Security benefits may be taxable, but only if your total income exceeds certain thresholds. The IRS uses a formula called "combined income" to decide how much of your benefit counts as taxable income. Most people receiving Social Security do not pay tax on it, but those with substantial income from pensions, investments, or continued work may owe federal income tax on a portion of their benefits.
The tax applies only to the federal level — Social Security is not subject to state income tax in any state. However, a small number of states tax retirement income in ways that can indirectly affect your Social Security planning.
Key Takeaways
- Combined income is calculated by adding your adjusted gross income, nontaxable interest, and half of your Social Security benefits together.
- If your combined income is below $25,000 (single) or $32,000 (married filing jointly), none of your Social Security is taxable.
- Between those thresholds and higher limits, up to 50 percent of your benefits may be taxable; above the higher limits, up to 85 percent may be taxable.
- You can request that the Social Security Administration withhold federal income tax from your monthly benefit to avoid a tax bill at year-end.
How the IRS calculates combined income
Combined income is not the same as your adjusted gross income (AGI). To find your combined income, start with your AGI, add back any tax-exempt interest (such as interest from municipal bonds), and then add half of your Social Security benefits for the year.
For example, if you have an AGI of $20,000, nontaxable interest of $2,000, and received $18,000 in Social Security benefits, your combined income would be $20,000 + $2,000 + ($18,000 ÷ 2) = $29,000. This combined income figure is what determines whether any of your benefits are taxable.
Income from part-time work, pensions, rental property, dividends, and capital gains all count toward combined income. Withdrawals from traditional IRAs and 401(k)s count as well. Withdrawals from Roth IRAs do not count, nor do withdrawals from health savings accounts used for may have access to medical expenses.
The two tax brackets for Social Security
The IRS applies two separate thresholds, sometimes called the "first bend point" and the "second bend point." How much of your benefit is taxable depends on which bracket your combined income falls into.
| Filing Status | First Threshold | Second Threshold |
|---|---|---|
| Single | $25,000 | $34,000 |
| Married filing jointly | $32,000 | $44,000 |
| Married filing separately | $0 | $0 |
If your combined income is below the first threshold for your filing status, none of your Social Security is taxable. If it falls between the first and second threshold, up to 50 percent of your benefits may be taxable. If it exceeds the second threshold, up to 85 percent of your benefits may be taxable.
These thresholds have not changed since 1984 and do not adjust for inflation each year. That means more people cross into the taxable range over time, even if their actual income stays the same.
How to calculate the taxable amount
The calculation is complex, and the IRS provides a worksheet in Publication 915 to work through it. Many people find it easier to use tax software or ask a tax professional, especially if they have multiple income sources.
In general, if your combined income is between the first and second threshold, the taxable amount is the lesser of (1) 50 percent of your benefits, or (2) 50 percent of the amount by which your combined income exceeds the first threshold. If your combined income exceeds the second threshold, you add a second calculation: 85 percent of the amount over the second threshold, plus the amount from the first calculation, but the total cannot exceed 85 percent of your total benefits.
Because the math involves multiple steps, it is worth double-checking your calculation or having a tax professional review it before you file.
Withholding tax from your Social Security check
You can ask the Social Security Administration to withhold federal income tax from your monthly benefit payment. This prevents a large tax bill when you file your return and spreads the tax across the year.
To set up withholding, complete Form W-4V (Voluntary Withholding Request) and submit it to your local Social Security office, mail it to Social Security, or upload it through your my Social Security account online. You can choose to have 7, 10, 12, or 22 percent of your benefit withheld, or you can request a specific dollar amount.
Withholding is voluntary and does not change how much tax you owe — it only changes when you pay it. If you do not withhold enough, you may still owe tax at filing time. If you withhold too much, you will receive a refund when you file.
State tax treatment of Social Security
Social Security benefits are not subject to state income tax in any state. However, some states tax other retirement income (such as pensions or IRA withdrawals) differently, which can affect your overall tax picture if you live in one of those states.
A few states — including Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, and Vermont — tax some or all retirement income but exempt Social Security specifically. If you receive both Social Security and a pension, your state tax bill depends on how that state treats pension income, not Social Security.
Planning ahead to reduce taxable benefits
If you are approaching the point where your Social Security will become taxable, a few strategies may help. Delaying Social Security increases your monthly benefit and may allow you to manage other income differently in the years before you claim. Converting a traditional IRA to a Roth in a lower-income year can reduce future required minimum distributions, which count toward combined income.
Placing money in a health savings account (if you are may be able to access) removes it from taxable income and does not count toward combined income when you withdraw it for medical expenses. Directing investment income to tax-deferred accounts rather than taxable accounts also reduces combined income.
These strategies work best when planned in advance with a tax professional who understands your full financial picture.
Frequently Asked Questions
Do I have to pay tax on all of my Social Security if my income is high enough?
No. Even if your combined income is very high, the maximum amount of your Social Security that can be taxed is 85 percent. The remaining 15 percent is never subject to federal income tax, regardless of your other income.
If I work part-time while receiving Social Security, does my wages count toward the tax calculation?
Yes. Wages from part-time work count as part of your adjusted gross income, which feeds into the combined income calculation. This can push you into a higher tax bracket for your Social Security benefits.
What if I receive Social Security and a pension from my former employer?
Both count toward your combined income. Your pension is part of your adjusted gross income, and half of your Social Security is added to that. Together, they determine whether your benefits are taxable. You may want to coordinate the timing of pension payments and Social Security claims with a tax professional.
Can I reduce my combined income by donating to charity?
Charitable donations reduce your adjusted gross income only if you itemize deductions on your tax return (rather than taking the standard deduction). If you take the standard deduction, charitable donations do not lower your combined income for Social Security tax purposes.
What happens if I did not withhold enough tax and owe money at tax time?
You can pay the balance when you file your return. If you expect this to happen again next year, you can increase your withholding by submitting a new Form W-4V to Social Security, or you can make quarterly estimated tax payments to the IRS if you have other income sources.