Whether You Pay Tax on Social Security Depends on Your Total Income

Not all seniors pay income tax on Social Security, but some do—it depends 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, you owe no federal tax on your Social Security benefits. If it goes above that threshold, you may owe tax on a portion of your benefits.

Combined income is calculated as 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 they affect more seniors now than they did decades ago.

Key Takeaways

  • You may owe federal income tax on Social Security if your combined income (adjusted gross income plus nontaxable interest plus half your benefits) exceeds $25,000 for single filers or $32,000 for married couples filing jointly.
  • If you are below the threshold, you owe no federal tax on your benefits, even if you must file a return for other reasons.
  • Up to 85 percent of your Social Security can be taxed as ordinary income if your combined income is high enough, but never more than 85 percent.
  • Some states also tax Social Security benefits, while others do not—the rules vary by state and depend on your state income and age.
  • You can request that the Social Security Administration withhold federal income tax from your monthly benefit check to avoid owing a large amount at tax time.

How the IRS Calculates Whether Your Benefits Are Taxed

The IRS uses a two-tier system. In the first tier, if your combined income is between the base amount ($25,000 single, $32,000 married filing jointly) and a higher threshold ($34,000 single, $44,000 married filing jointly), you may owe tax on up to 50 percent of your benefits. In the second tier, if your combined income exceeds the higher threshold, you may owe tax on up to 85 percent of your benefits.

The actual amount taxed is calculated using a worksheet, not a straightforward percentage. The IRS provides this worksheet in Publication 915, which you can find on irs.gov. Many tax software programs and tax preparers calculate this automatically, so you do not have to do it by hand. If you prepare your own return, the worksheet walks you through the steps in order.

Remember that combined income includes income sources many seniors forget about: distributions from traditional IRAs, interest from savings accounts, rental income, and even tax-exempt bond interest. Roth IRA withdrawals do not count toward combined income, but the earnings portion of a conversion from a traditional IRA does.

Examples of How the Tax Calculation Works

Suppose you are single and receive $20,000 in Social Security and $10,000 in interest from a savings account. Your adjusted gross income is $10,000, nontaxable interest is $0, and half your benefits is $10,000. Your combined income is $20,000, which is below the $25,000 threshold. You owe no federal tax on your Social Security.

Now suppose you are single and receive $20,000 in Social Security and $20,000 from a part-time job. Your adjusted gross income is $20,000, nontaxable interest is $0, and half your benefits is $10,000. Your combined income is $30,000, which is $5,000 above the first threshold. Using the worksheet, you would owe tax on a portion of your benefits—not all of it, but some.

If you are married filing jointly and receive $30,000 in Social Security combined with your spouse, plus $20,000 in pension income, your combined income is $35,000 ($20,000 + $0 + $15,000). This is $3,000 above the $32,000 threshold but below the $44,000 second threshold, so again, a portion of your benefits would be taxable.

State Income Tax on Social Security

Thirty-seven states do not tax Social Security benefits at all. Thirteen states tax some or all of your benefits, but most of those states offer exemptions based on age or income level. Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, and Vermont all tax Social Security to some degree. Illinois and Mississippi tax only the portion of benefits that exceeds federal thresholds.

The rules in each state are different. Some states exempt benefits entirely if you are over a certain age, usually 59½ or 62. Others use income thresholds similar to the federal system but with different dollar amounts. A few states tax all benefits with no exemption. You will need to check your state's tax agency website or speak with a tax preparer who knows your state's rules.

If you live in a state that taxes Social Security, you may need to file a state return even if you do not owe federal tax. Some states require you to file if you have any Social Security income, regardless of the amount. Others only require a return if your income exceeds a state-specific threshold.

How to Reduce Taxes on Your Social Security

One strategy is to manage the timing of other income. If you are considering a large withdrawal from a traditional IRA or the sale of an investment, doing it in a year when you have lower other income can keep your combined income below the threshold. This is not always possible, but it is worth discussing with a tax preparer or financial advisor.

Another option is to convert a traditional IRA to a Roth IRA in a year when your income is lower. The conversion itself counts as income in that year, but once the money is in a Roth, future withdrawals do not count toward combined income. This can be useful if you expect your income to rise in later years.

You can also request that the Social Security Administration withhold federal income tax from your monthly benefit payment. You do 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 can choose to have 7, 10, 12, or 22 percent withheld, or you can request a specific dollar amount. This does not reduce the tax you owe, but it spreads the payment across the year instead of requiring a lump sum at tax time.

What Happens If You Do Not Pay Tax on Benefits You Owe Tax On

If you owe tax on your Social Security but do not pay it, the IRS will send you a notice. You will owe the unpaid tax plus interest, which accrues daily. The interest rate changes quarterly and is currently in the range of 8 percent per year, though it varies. You may also face a penalty for underpayment if you did not withhold enough tax during the year.

If you cannot pay the full amount, you can set up a payment plan with the IRS. You can also request an installment agreement, which allows you to pay in monthly amounts. The IRS has different types of plans depending on how much you owe and your financial situation. Contact the IRS directly or work with a tax professional to explore your options.

Frequently Asked Questions

Do I have to file a tax return if I only have Social Security income?

It depends on your age and filing status. For 2024, if you are single and your only income is Social Security, you generally do not have to file unless your combined income exceeds $25,000. However, you may want to file anyway if you are due a refund or if you need to report other income. Check the IRS website or Publication 915 for the exact threshold for your situation.

Can I exclude Social Security from my income if I am over 65?

No. Age does not change whether your Social Security is taxable. The only thing that matters is your combined income. Some states offer age-based exemptions for state tax purposes, but the federal tax rules explore to everyone the same way regardless of age.

Does my spouse's Social Security count toward my combined income?

If you are married filing jointly, you combine both spouses' Social Security benefits and all other income to calculate combined income. If you are married filing separately, each spouse calculates their own combined income separately, and the thresholds are much lower ($0 for married filing separately).

What if I worked and paid Social Security taxes—does that change whether I owe income tax on benefits?

No. The fact that you paid Social Security taxes during your working years does not affect whether your benefits are taxable. Taxation of benefits is based entirely on your combined income in the year you receive them, not on your work history.

Can I deduct the taxes I pay on Social Security from my other income?

No. You cannot deduct taxes paid on Social Security benefits. However, if you have tax withheld from your benefit check, that withholding counts as a payment toward your total tax liability for the year, just like withholding from a paycheck would.