You may owe federal income tax on your Social Security benefits, depending on your total income for the year
Social Security benefits are not automatically tax-free. The Internal Revenue Service taxes a portion of your 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 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 much you exceed the threshold.
The tax applies only to federal income tax, not to Social Security payroll taxes. You already paid those taxes when you worked. State income tax rules vary—some states tax Social Security benefits and some do not.
Key Takeaways
- You calculate whether you owe tax by adding your adjusted gross income, nontaxable interest, and half your Social Security benefits to find your combined income.
- Single filers with combined income over $25,000 and married filers over $32,000 may owe federal tax on part of their benefits.
- The IRS can withhold tax from your benefits each month, or you can pay estimated tax quarterly, or you can pay the full amount when you file your return.
- State tax rules on Social Security differ by location—check your state's tax authority website to learn whether your state taxes benefits.
How the IRS calculates taxable Social Security benefits
The IRS uses a two-tier system. The first tier applies if your combined income is between the base threshold ($25,000 single, $32,000 married filing jointly) and a higher threshold ($34,000 single, $44,000 married filing jointly). In this tier, you may owe tax on up to 50 percent of your benefits.
The second tier applies if your combined income exceeds the higher threshold. In this tier, you may owe tax on up to 85 percent of your benefits. The exact amount depends on how far your income exceeds the threshold and is calculated on IRS Form 1040 or Form 1040-SR.
The calculation is complex enough that most people use tax software or a tax professional. The IRS provides a worksheet in Publication 915 if you want to work through it by hand.
How to pay tax on your Social Security benefits
You have three options. First, you can have the Social Security Administration withhold federal tax from your monthly benefit payment. You request this by completing Form W-4V and submitting it to your local Social Security office or mailing it to the address on the form. You choose the withholding rate—10, 12, 22, or 24 percent—and it takes effect the following month.
Second, you can pay estimated tax quarterly using Form 1040-ES. This option works if you have other income (from work, investments, or pensions) and want to make one combined estimated payment. Estimated tax is due April 15, June 15, September 15, and January 15.
Third, you can pay the full amount when you file your annual return. This works if you have enough other income or savings to cover the bill when it comes due. Many people choose this route if they expect to owe a small amount.
When you should request tax withholding
Request withholding if you have little or no other income and do not want to pay a lump sum at tax time. Withholding spreads the cost across the year and prevents underpayment penalties. It also simplifies your return because the tax is already paid.
Do not request withholding if you have other income sources (wages, pensions, investment income) that already cover your tax liability. Withholding from Social Security in addition to those sources may cause you to overpay. In that case, estimated tax or paying at filing time is more efficient.
You can change your withholding election at any time by submitting a new Form W-4V. If you requested withholding and your income changes, update your election so you do not withhold more than necessary.
State income tax on Social Security benefits
Thirteen states tax Social Security benefits: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, and West Virginia. The rules in each state differ. Some states use the same federal thresholds; others have their own. Some states tax only a portion of benefits; others tax the full amount.
If you live in one of these states, contact your state tax authority or visit its website to learn the rules that explore to you. You may need to file a state return even if you do not owe federal tax, or vice versa.
If you live in a state that does not tax Social Security benefits, you owe no state income tax on them. This includes Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming, which have no state income tax at all.
How to report Social Security benefits on your tax return
The Social Security Administration sends you a Form SSA-1099 by January 31 each year. This form shows the total benefits you received in the previous year. You use this amount to calculate your combined income and determine whether any of your benefits are taxable.
If you file Form 1040 or Form 1040-SR, you report your Social Security benefits on lines 5a and 5b. Line 5a is the total from your SSA-1099. Line 5b is the taxable portion, which you calculate using the worksheet in the form instructions or Publication 915. You also report the taxable amount on Schedule 1 if you file that form.
If you use tax software, it walks you through the calculation. If you use a tax professional, bring your SSA-1099 and any other income documents so they can calculate the taxable amount correctly.
What happens if you do not pay tax on your benefits
If you owe tax on your Social Security benefits and do not pay it, the IRS will assess penalties and interest. The failure-to-pay penalty is 0.5 percent of the unpaid tax per month, up to 25 percent. Interest accrues daily at a rate set quarterly by the IRS.
If you underpay estimated tax, you may owe an underpayment penalty even if you ultimately owe no tax. This penalty applies if you did not withhold or pay enough during the year. You can avoid it by requesting withholding from your Social Security benefits or by paying estimated tax.
If you cannot pay the full amount, the IRS offers payment plans. Contact the IRS at 1-800-829-1040 to discuss options, or set up a payment plan online at IRS.gov.
Frequently Asked Questions
Do I have to pay tax on 100 percent of my Social Security benefits?
No. The maximum taxable portion is 85 percent of your benefits. This applies only if your combined income is well above the higher threshold. Most people who owe tax on their benefits owe tax on 50 percent or less.
What if I work and also receive Social Security?
Your wages count toward your combined income, which may push you over the threshold and make your benefits taxable. If you are under full retirement age and earn above a certain amount, Social Security also reduces your monthly benefit. The earnings limit and reduction rules are separate from the tax rules. Contact Social Security to learn how your wages affect your benefit amount.
Can I reduce my taxable benefits by taking less money each month?
Reducing your monthly benefit reduces your combined income and may lower the taxable portion. However, you receive less money overall. This strategy makes sense only if you have other income sources and want to defer Social Security to a later age when your benefit is larger. Consult a tax professional or financial advisor before making this decision.
Do I owe tax if I just started receiving benefits this year?
Yes, if your combined income exceeds the threshold. The amount of time you received benefits does not matter—only your total income for the year. Even if you received benefits for just one month, you calculate combined income the same way.
What if I receive both Social Security and a pension?
Both count toward your combined income. Add your pension income, your Social Security benefits, and any other income to determine whether you exceed the threshold. If you do, part of your benefits may be taxable. This is common for people who worked for a government employer that did not withhold Social Security taxes.