Yes, the federal government taxes Social Security benefits for some people, but not for others

Whether you owe federal income tax on your Social Security depends on your total income for the year. The IRS uses a formula called combined income to decide. If your combined income stays below a certain threshold, you pay no federal tax on your benefits. If it goes above that threshold, you may owe tax on up to 85 percent of what you received.

Combined income is not the same as your Social Security payment alone. It includes your Social Security benefits plus any wages, pensions, interest, dividends, and other income you earned during the year. The IRS adds half of your annual Social Security benefit to your other income, then compares that total to the threshold amounts set by law.

The threshold amounts have not changed since 1984. For a single filer in 2024, the first threshold is $25,000. For married filing jointly, it is $32,000. These numbers do not adjust for inflation each year, which means more people cross into taxable territory over time.

Key Takeaways

  • You owe federal tax on Social Security only if your combined income (half your benefits plus all other income) exceeds $25,000 for single filers or $32,000 for married filing jointly.
  • If you are taxed, the IRS taxes up to 85 percent of your benefits, never 100 percent, and you may owe tax on as little as 50 percent depending on your income level.
  • You do not pay Social Security tax or Medicare tax on your benefits, only federal income tax, and only if your combined income is high enough.
  • The threshold amounts have stayed the same since 1984, so inflation has pushed more beneficiaries into the taxable range over the decades.

How the IRS calculates whether you owe tax

The calculation has two tiers. If your combined income is between the first and second threshold, you may owe tax on up to 50 percent of your benefits. If it exceeds the second threshold, you may owe tax on up to 85 percent.

For single filers, the first threshold is $25,000 and the second is $34,000. For married filing jointly, the first is $32,000 and the second is $44,000. For married filing separately, the first threshold is $0 — meaning almost any income pushes you into the taxable range.

The actual amount you owe depends on how far above the threshold you go. The IRS uses a specific formula: it takes the amount by which your combined income exceeds the first threshold, multiplies it by 0.5, and compares that to 50 percent of your benefits. Whichever is smaller is the amount subject to tax. If your combined income exceeds the second threshold, the calculation becomes more complex and can result in up to 85 percent of your benefits being taxed.

You will need your Social Security statement (which shows your annual benefit amount), your tax return from the previous year, and a record of any other income you received. The Social Security Administration sends Form SSA-1099 each January showing what you received in the prior year.

Who is most likely to owe tax on benefits

Retirees who continue working part-time or full-time are the largest group affected. If you claim Social Security at 62 but keep earning wages, your combined income will likely exceed the threshold. The same applies if you have a pension from a government job, military service, or a private employer.

People with investment income — interest from savings accounts, dividends from stocks, capital gains from selling property — also cross the threshold more often. A couple with $30,000 in Social Security benefits and $10,000 in dividend income has a combined income of $25,000 (half of $30,000 plus $10,000), which puts them right at the first threshold for married filing jointly.

Beneficiaries who delay claiming until 70 often have lower combined income because they are not yet receiving Social Security, even if they have other retirement income. Those who claim at 62 and have other income sources are taxed more frequently.

State and local taxes on Social Security

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 from federal rules.

Some states use the same combined income thresholds as the federal government. Others have their own thresholds or tax all benefits above a certain age. A few states exempt benefits for people over a certain age, such as 59 or 62. You will need to check your state's tax return instructions or contact your state revenue department to know whether you owe state tax.

If you live in a state that taxes Social Security and you owe federal tax, you will likely owe state tax as well, though the amount may differ. If you live in a state with no income tax — such as Florida, Texas, or Wyoming — you owe no state tax on your benefits regardless of your combined income.

Withholding and estimated tax payments

If you owe federal tax on your Social Security, you have two ways to pay: withhold from your monthly benefit or make estimated quarterly tax payments.

To withhold from your benefit, you file Form W-4V with the Social Security Administration. You can choose to have the IRS withhold 7, 10, 12, or 22 percent of your monthly payment. This is the simpler route for most people because the money comes out automatically and you do not have to remember to send payments.

If you prefer not to withhold, you can make estimated tax payments to the IRS four times a year using Form 1040-ES. This route requires you to calculate what you owe and send it in by the deadline each quarter. Most people find withholding easier, but estimated payments give you more control if your income varies month to month.

You can change your withholding choice at any time by contacting Social Security or filing a new Form W-4V. If you withhold too much, you will get a refund when you file your tax return. If you withhold too little, you may owe when you file.

What happens if you do not pay the tax you owe

If you owe federal tax on your Social Security and do not pay it, the IRS can assess penalties and interest on the unpaid amount. The penalty for not paying on time is usually 0.5 percent of the unpaid tax per month, up to 25 percent total. Interest accrues daily at a rate set by the IRS each quarter.

If you file your tax return late and owe tax, the failure-to-file penalty is steeper than the failure-to-pay penalty. The IRS can also offset your future tax refunds or, in rare cases, garnish other income to collect what you owe.

If you think you will owe tax but cannot pay the full amount by the deadline, you can request a payment plan from the IRS. Short-term plans (120 days or less) are free. Long-term installment agreements have a setup fee and monthly interest charges, but they stop the IRS from taking enforcement action while you pay.

Planning ahead to reduce taxable income

If you are close to the threshold and want to lower your combined income, you have a few options. Delaying when you claim Social Security reduces your annual benefit and pushes your combined income lower in the years before you claim. Each year you wait past 62 increases your monthly benefit by about 8 percent, and the higher benefit eventually offsets the years you did not receive it.

If you have investment income, you can manage the timing of when you sell assets or take distributions from retirement accounts. Selling a losing investment to offset a gain (called tax-loss harvesting) can reduce your taxable income. Delaying when you take money from an IRA or 401(k) until after you turn 73 (when required minimum distributions begin) can also help, though this strategy works only if you do not need the money sooner.

Some people move to a state with no income tax to avoid state tax on benefits, though this does not affect your federal tax. Moving is a major decision and should not be made solely for tax reasons, but it is worth knowing that nine states have no income tax at all.

Frequently Asked Questions

Can I avoid paying tax on Social Security by not reporting it?

No. The Social Security Administration reports what you received to the IRS on Form SSA-1099, and the IRS matches that to your tax return. If you do not report it and owe tax, the IRS will find the discrepancy and assess penalties and interest. Reporting your benefits is required.

Do I pay Medicare tax on my Social Security benefits?

No. You do not pay Social Security tax (6.2 percent) or Medicare tax (1.45 percent) on your Social Security benefits. You only pay federal income tax, and only if your combined income exceeds the threshold. If you are still working and earning wages, you pay these taxes on your wages, not on your benefits.

What if my spouse died — does that change how my benefits are taxed?

If you were married filing jointly and your spouse dies, your filing status changes to single for that year and all future years (unless you remarry). This means your threshold drops from $32,000 to $25,000, and you may owe tax on benefits you did not owe tax on before. You should recalculate your withholding after your spouse's death.

Does the Roth conversion affect whether I owe tax on Social Security?

Yes. When you convert money from a traditional IRA to a Roth IRA, that conversion counts as income for the year and increases your combined income. This can push you over the threshold and make your Social Security benefits taxable. Plan conversions carefully if you are close to the threshold.