Social Security benefits may be taxed, but only if your total income exceeds certain thresholds

Whether you owe federal income tax on your Social Security benefits depends on your combined income—not just what you receive from Social Security. Combined income includes your wages, interest, dividends, and half of your Social Security benefits added together. If that total stays below a set threshold, your benefits are not taxed. If it exceeds the threshold, between 0 and 85 percent of your benefits become taxable.

The thresholds are $25,000 for single filers and $32,000 for married couples filing jointly. These numbers have not changed since 1984, which means more people cross them each year as wages and benefits rise. Some states also tax Social Security benefits, though most do not.

Key Takeaways

  • Your Social Security benefits are taxed only if your combined income (wages, interest, and half your benefits) exceeds $25,000 for single filers or $32,000 for married couples filing jointly.
  • If you cross the threshold, the IRS taxes between 50 and 85 percent of your benefits, not the full amount.
  • You calculate combined income by adding your adjusted gross income, nontaxable interest, and half your Social Security benefits.
  • Most states do not tax Social Security benefits, but a handful including Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, Rhode Island, and Utah do tax them at least partially.

How the IRS calculates what portion of your benefits is taxable

The calculation happens in two tiers. In the first tier, if your combined income exceeds the base threshold by up to $9,000 (single) or $12,000 (married filing jointly), you pay tax on up to 50 percent of your benefits. In the second tier, if your combined income exceeds the first tier limit, you pay tax on up to 85 percent of your benefits.

The IRS does not tax your entire benefit amount even if you are well above the threshold. The maximum taxable portion is 85 percent. This means if you receive $2,000 per month in benefits, no more than $1,700 of that monthly amount will be counted as taxable income, regardless of how high your other income is.

You do not have to do this calculation yourself. The Social Security Administration sends you a Form SSA-1099-Social Security Benefit Statement each January showing how much you received in the prior year. You then report this on your federal tax return using Form 1040 and Schedule 1, and the IRS applies the tax rules automatically.

What counts as combined income

Combined income includes more than just your salary. It includes wages from employment, self-employment income, interest from savings accounts and bonds, dividends from stocks, capital gains from selling investments, rental income, and pension payments. It also includes half of your Social Security benefits themselves.

Some types of income do not count toward the threshold. Tax-exempt interest from municipal bonds does not count, but nontaxable interest from other sources does. Distributions from a Roth IRA do not count, but distributions from a traditional IRA or 401(k) do count. If you are unsure whether a specific income source counts, the IRS worksheet in the instructions to Form 1040 walks through each type.

State taxes on Social Security benefits

Nine states tax Social Security benefits at least partially: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, Rhode Island, and Utah. Each state has its own rules about which residents must pay and at what rate.

Colorado, Kansas, and Minnesota tax benefits only for residents above certain income thresholds, similar to the federal system. Connecticut, Missouri, Montana, and Utah tax benefits but offer exemptions for residents over a certain age—usually 59½ or 62. Nebraska and Rhode Island tax benefits but allow deductions that reduce the taxable amount. If you live in one of these states, check your state tax authority's website for the specific rules that explore to you.

Planning ahead to reduce taxes on your benefits

If you are approaching the income threshold, you have limited options to reduce the tax, but a few exist. Delaying when you claim Social Security can lower your combined income in early retirement years, since you will not receive benefits yet. Withdrawing from a Roth IRA instead of a traditional IRA does not increase your combined income, because Roth withdrawals are not counted. Moving tax-deferred income into a year when you have lower overall income can also help.

Some people reduce their combined income by timing the sale of investments or deferring bonuses to a later year. These strategies work only if you have control over when income arrives. If most of your income is from a pension or wages, your options are narrower. A tax professional who works with retirees can review your specific situation and suggest which strategies might lower your tax bill.

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 when you file your return, or you can request that the Social Security Administration withhold taxes from your monthly benefit payment. To set up withholding, complete Form W-4V (Voluntary Withholding Request) and mail it to your local Social Security office, or submit it online through your my Social Security account.

Withholding is optional, but it prevents a large tax bill at the end of the year. You can choose to withhold 7, 10, 15, or 22 percent of your monthly benefit. If you are unsure which rate to pick, the IRS tax withholding estimator can help you calculate how much to withhold based on your total income and filing status.

Frequently Asked Questions

If I have not worked and only receive Social Security, do I owe taxes?

No. If Social Security is your only income, your combined income will be below the threshold, and your benefits are not taxed. You owe federal income tax only if your combined income exceeds $25,000 (single) or $32,000 (married filing jointly).

Does working part-time in retirement increase the taxes I owe on my benefits?

Yes. Wages from part-time work count toward your combined income. Even a small amount of wages can push you over the threshold and make your benefits taxable. However, the tax on benefits is usually lower than the tax on the wages themselves, so you may still come out ahead financially.

Can I avoid the tax by not claiming my benefits until later?

Delaying your claim reduces your combined income in the years before you claim, which may keep you below the tax threshold during those years. Once you do claim, the same tax rules explore. Delaying also increases your monthly benefit amount, which may increase your combined income in later years.

What if I made a mistake on my tax return and did not report my benefits correctly?

Contact the IRS or file an amended return using Form 1040-X. The IRS can assess penalties and interest if the error was substantial, but correcting it voluntarily is better than waiting for the IRS to find it during an audit.

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 filing threshold for your age and filing status, you are not required to file. However, you may want to file anyway if you had taxes withheld, because you could receive a refund.