Whether Your Benefits Are Taxed Depends on Your Other Income

Social Security benefits may or may not be taxed, depending on how much other income you have. The IRS uses a formula called combined income to decide. If your combined income stays below a certain threshold, your benefits are not taxed at all. If it goes above that threshold, between 0 and 85 percent of your benefits become taxable income on your federal return.

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. These thresholds have not changed since 1984, so more people cross them each year as wages and benefit amounts rise.

You do not owe tax on benefits themselves—you owe tax on the portion the IRS counts as taxable income. This is different from how wages work. A person earning $30,000 in wages pays tax on the full $30,000. A person with $30,000 in combined income that includes Social Security may pay tax on only $6,000 to $25,500 of it, depending on the exact breakdown.

Key Takeaways

  • Combined income—your adjusted gross income plus half your Social Security benefits—determines whether any benefits are taxed.
  • Single filers with combined income above $25,000 and married filers above $32,000 will have some or all benefits taxed.
  • At most, 85 percent of your benefits can be taxed in a single year, even if combined income is very high.
  • You receive a Form SSA-1099 each January showing the amount of benefits paid in the prior year, which you use to calculate taxable income.
  • Some states do not tax Social Security benefits at all, while others tax them under their own rules separate from federal tax.

How the IRS Calculates Taxable Benefits

The calculation happens in two tiers. In the first tier, if your combined income exceeds the threshold by up to $9,000 (single) or $12,000 (married), you may owe tax on up to 50 percent of the excess. In the second tier, if combined income exceeds the threshold by more than those amounts, you may owe tax on up to 85 percent of the excess, plus any amount from the first tier.

The math is not straightforward enough to do by hand reliably. The IRS worksheet in the instructions for Form 1040 walks you through it step by step. If you use tax software or a tax preparer, they calculate it automatically. The key is having the right numbers: your adjusted gross income from your tax return, any nontaxable interest (from municipal bonds, for example), and the total Social Security benefits shown on your Form SSA-1099.

Many people find that once they start taking Social Security, their combined income crosses the threshold even if their other income has not changed. This happens because combined income includes half of benefits themselves. A person with $20,000 in pensions and $20,000 in Social Security has combined income of $30,000 ($20,000 + $10,000), which exceeds the $25,000 threshold for single filers.

What Counts as Income for This Calculation

Adjusted gross income includes wages, self-employment income, pensions, taxable interest, capital gains, and distributions from retirement accounts like IRAs and 401(k)s. It does not include standard deductions or tax-exempt income like workers' compensation or certain disability payments.

Nontaxable interest—income that is not subject to federal income tax—also counts toward combined income for Social Security purposes. This includes interest from municipal bonds and some U.S. savings bonds. Many people do not realize this, because nontaxable interest does not appear on their tax return. If you have municipal bonds, you need to add that interest to your other income when calculating combined income.

Roth IRA distributions are treated differently depending on whether they are contributions or earnings. Contributions you made to a Roth come out tax-free and do not count toward combined income. Earnings that come out tax-free also do not count. Only distributions that would be taxable (if you did not meet the five-year rule or age 59½, for example) count toward combined income.

State Taxes on Social Security Benefits

Thirteen states tax Social Security benefits under their own rules: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, and West Virginia. The rules vary by state. Some states use the same federal thresholds; others use different ones. Some states tax only a portion of benefits; others tax up to the same 85 percent cap as the federal government.

Colorado, Kansas, and Nebraska have begun phasing out their Social Security taxes, so the rules change year to year. If you live in one of these states, check your state's tax agency website for the current rules. If you live in another state, Social Security benefits are not subject to state income tax at all, even if the federal government taxes them.

You report state tax on Social Security using your state's income tax form, not your federal return. Some states require a separate worksheet; others let you report it directly on the main form. Your tax software or preparer will handle this if you use one.

Planning to Reduce Taxable Benefits

If you have not yet started taking Social Security, you can reduce future tax by delaying benefits. Each year you wait past your full retirement age, your monthly benefit increases by about 8 percent. Higher monthly benefits do mean higher combined income, but the increase in benefits is larger than the increase in taxable income, so delaying can reduce the percentage of benefits that are taxed.

If you are already taking benefits, you have fewer options. You cannot reduce the benefits themselves without suspending them entirely, which is rarely worth doing. You can reduce other income—for example, by withdrawing less from retirement accounts, selling fewer investments, or timing the sale of a business or property to a different tax year. Each dollar of other income you avoid reduces combined income by one dollar, which may push you below a threshold or reduce the percentage of benefits that are taxed.

Some people manage income by converting traditional IRA funds to Roth IRAs in years when other income is low. This increases taxable income in that year but removes the converted amount from future required distributions, which reduces combined income in later years. This strategy works only if you have the cash to pay the tax on the conversion without withdrawing from the IRA itself.

How to Report Social Security on Your Tax Return

You receive a Form SSA-1099 from Social Security each January, showing the total benefits paid to you in the prior year. You use this amount to calculate combined income and determine how much of your benefits are taxable. You then report the taxable portion on line 5b of Form 1040 (or the equivalent line on your state return).

If no benefits are taxable, you still report the total on line 5a and zero on line 5b. This tells the IRS you received benefits but owed no tax on them. If you use tax software, it will ask for the total from your SSA-1099 and calculate the taxable amount automatically using the IRS worksheet.

If you did not receive an SSA-1099 by early February, contact Social Security at 1-800-772-1213 or visit ssa.gov. You need this form to file accurately. If you file before receiving it, you can file an amended return once you have the form.

Frequently Asked Questions

Do I have to pay tax on all my Social Security benefits?

No. If your combined income is below the threshold for your filing status, none of your benefits are taxed. Even if combined income is above the threshold, at most 85 percent of your benefits can be taxed in any year. The other 15 percent is never subject to federal income tax.

What if I work and also receive Social Security?

Wages count as part of your adjusted gross income, which is part of combined income. This means working while taking Social Security increases the likelihood that some benefits will be taxed. Additionally, if you have not yet reached full retirement age and earn more than $23,400 in 2024, Social Security reduces your monthly benefit by $1 for every $2 you earn above that amount. This is separate from income tax.

Can I avoid paying tax on Social Security by not filing a return?

No. If your combined income is above the threshold, you owe federal income tax on the taxable portion of benefits whether or not you file. The IRS can assess the tax and penalties even if you do not file. You must file to report the income and pay what you owe.

Does Medicare premium withholding count as income?

No. Medicare premiums are deducted from your Social Security benefit before you receive it, but the amount deducted does not reduce your combined income. You count the full benefit amount shown on your SSA-1099, not the amount you actually received after Medicare deductions.

What if I received benefits for only part of the year?

Your SSA-1099 shows only the benefits you actually received. If you started benefits in June, for example, the form shows only six months of benefits. You use that amount to calculate combined income. The same applies if you suspended benefits partway through the year.