How much of your Social Security is taxable depends on your other income

Not all of your Social Security benefit is taxable. The amount you owe tax on depends on your combined income—which includes your wages, interest, dividends, and half of your Social Security benefits themselves. If your combined income stays below certain thresholds, you pay tax on none of it. If it goes above those thresholds, you may pay tax on up to 85 percent of your benefits.

The IRS uses two income thresholds to determine this. For single filers, the first threshold is $25,000; for married couples filing jointly, it is $32,000. A second threshold sits at $34,000 for single filers and $44,000 for married couples filing jointly. How much of your benefit becomes taxable depends on which threshold your combined income crosses.

Key Takeaways

  • Combined income is calculated by adding your adjusted gross income, tax-exempt interest, and half of your Social Security benefits.
  • If your combined income is below $25,000 (single) or $32,000 (married filing jointly), none of your Social Security is taxed.
  • Between the first and second threshold, you may owe tax on up to 50 percent of your benefits.
  • Above the second threshold, you may owe tax on up to 85 percent of your benefits.
  • These income thresholds have not changed since 1984, even though Social Security benefit amounts have risen.

How to calculate your combined income

The IRS calls this figure combined income, and it is the starting point for determining how much of your benefit is taxable. To calculate it, add three things together: your adjusted gross income (AGI), any tax-exempt interest you earned, and half of your Social Security benefits for the year.

Your adjusted gross income is the number on line 11 of your Form 1040 tax return. Tax-exempt interest usually comes from municipal bonds or bond funds. Half of your Social Security benefits is exactly what it sounds like—if you received $20,000 in benefits during the year, you count $10,000 toward combined income.

Once you have that total, compare it to the two thresholds. The first threshold is $25,000 for single filers, head of household filers, and may have access to widows or widowers. For married couples filing jointly, it is $32,000. For married couples filing separately, it is $0—meaning any combined income at all may trigger taxation.

What happens if you are below the first threshold

If your combined income is below $25,000 (or $32,000 if married filing jointly), none of your Social Security benefits are taxable. You do not owe federal income tax on them, and you do not report them on your tax return.

This is the situation for many retirees who have little income beyond Social Security itself. If you are receiving only Social Security and no other income, your combined income will be half your benefit amount, which is almost always below the first threshold.

What happens if you are between the two thresholds

If your combined income is between $25,000 and $34,000 (single) or between $32,000 and $44,000 (married filing jointly), you may owe tax on up to 50 percent of your benefits. The exact amount is calculated using a formula on IRS Form 8949 or through tax software.

The formula works like this: take the amount your combined income exceeds the first threshold, multiply it by 50 percent, and compare that to half of your total Social Security benefits. Whichever is smaller is the amount of your benefits that becomes taxable.

For example, if you are single with combined income of $30,000 and received $20,000 in Social Security benefits, your excess over the first threshold is $5,000. Half of that is $2,500. Half of your benefits is $10,000. Since $2,500 is smaller, $2,500 of your Social Security becomes taxable.

What happens if you are above the second threshold

If your combined income exceeds $34,000 (single) or $44,000 (married filing jointly), you may owe tax on up to 85 percent of your benefits. This is calculated using a two-step formula that accounts for income above both thresholds.

The calculation is more complex at this level, but the outcome is that a larger portion of your benefit becomes taxable. The maximum amount of your Social Security that can be taxed is 85 percent, even if your combined income is very high.

If you have substantial income from pensions, investments, or continued work, you are likely to fall into this bracket. Tax software and tax professionals can calculate the exact amount, or you can work through the formula on IRS Publication 915.

Why these thresholds have not changed since 1984

The income thresholds that determine Social Security taxation were set by Congress in 1984 and have remained the same ever since. In 1984, $25,000 was a substantial income for a single retiree. Today, it is far below what many people earn in retirement.

Because the thresholds are fixed while Social Security benefit amounts increase each year with cost-of-living adjustments, more retirees fall into the taxable brackets over time. This is sometimes called "bracket creep." If you were not paying tax on your benefits five years ago, you may be now, even if your actual income has not changed.

Congress would need to pass new legislation to raise or adjust these thresholds. No such change has been enacted, so the 1984 thresholds remain in effect.

Which states also tax Social Security

Thirteen states tax Social Security benefits to some degree: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, and West Virginia. Each state uses its own rules and thresholds, which may differ from the federal calculation.

Some states exempt Social Security entirely if your income falls below a certain level. Others tax it the same way the federal government does. A few states have begun phasing out their Social Security tax in recent years. If you live in one of these states, check your state tax return instructions or contact your state revenue department to understand how your benefits are treated.

Frequently Asked Questions

Do I have to pay tax on Social Security if I am still working?

Your work income counts toward your combined income, which may push you over the thresholds and make your benefits taxable. Wages, self-employment income, and any other earned income all count. If you are working and receiving Social Security, you are more likely to owe tax on your benefits than if you were retired.

What if I have a large one-time income, like from selling a house?

Capital gains count toward combined income. A large gain from selling a home or other property could push you over the thresholds in that year and make your benefits taxable. The following year, if your income drops back down, your benefits may no longer be taxable.

Can I reduce my combined income to avoid taxation on my benefits?

Some strategies, like contributing to a traditional IRA, can lower your adjusted gross income. However, tax-exempt interest and half your Social Security benefits still count toward combined income, so these moves may have limited effect. A tax professional can review your specific situation.

If my benefits are taxed, do I pay tax twice?

No. You pay federal income tax on the portion of your benefits that is taxable. You do not pay Social Security tax on benefits you receive—that tax was paid when you worked. The income tax is separate and applies only to the taxable portion.

Where do I report my Social Security on my tax return?

Social Security benefits appear on lines 5a and 5b of Form 1040. Line 5a shows your total benefits; line 5b shows the taxable amount. The Social Security Administration sends you a Form SSA-1099 each January showing what you received the previous year.