Whether your Social Security is taxed depends on your other income

Social Security income may or may not be taxed in a given year. The IRS uses a formula based on your combined income — not just what you receive from Social Security. If your combined income stays below certain thresholds, you pay no federal tax on your benefits. If it rises above those thresholds, between 0 and 85 percent of your benefits become taxable.

Combined income is calculated as your adjusted gross income plus nontaxable interest plus half of your Social Security benefits. That half-benefit amount is what makes the math confusing: you are not actually receiving that money, but the IRS counts it toward the threshold that determines whether you owe tax.

State tax treatment varies. Some states do not tax Social Security at all. Others tax it the same way the federal government does. A few tax it differently or have their own thresholds. You need to check your state's rules separately.

Key Takeaways

  • The IRS taxes Social Security based on combined income, which includes half your benefits even though you do not receive that amount.
  • If your combined income is below $25,000 (single) or $32,000 (married filing jointly), you owe no federal tax on your benefits.
  • Between those thresholds and higher ones, you may owe tax on 50 percent of your benefits; above the higher thresholds, up to 85 percent becomes taxable.
  • State tax rules differ from federal rules and from each other, so check your state's treatment of Social Security separately.
  • You can request that the Social Security Administration withhold federal tax from your monthly payment to avoid a bill at tax time.

The income thresholds that trigger taxation

The IRS sets two thresholds for each filing status. If your combined income falls below the first threshold, none of your Social Security is taxable. Between the first and second threshold, up to 50 percent of your benefits may be taxed. Above the second threshold, up to 85 percent becomes taxable.

For single filers, the first threshold is $25,000 and the second is $34,000. For married couples filing jointly, the first is $32,000 and the second is $44,000. For married filing separately, the thresholds are much lower — typically $0 and $9,000 — which means most people in that category will have some benefits taxed.

These thresholds have not changed since 1984. Because they are fixed and inflation continues, more people cross into the taxable range each year, even if their actual spending power has not increased.

How the IRS calculates the taxable amount

The calculation happens in two steps. First, add half your Social Security benefits to your adjusted gross income and any nontaxable interest. This sum is your combined income. Then compare it to your threshold.

If combined income exceeds the first threshold but not the second, the taxable amount is the lesser of (1) half your Social Security benefits, or (2) half the amount by which your combined income exceeds the first threshold. If combined income exceeds the second threshold, the calculation becomes more complex: you add 85 percent of the excess over the second threshold to the amount calculated above, capped at 85 percent of total benefits.

The Social Security Administration publishes a worksheet each year to walk through this calculation. The IRS also provides Publication 915, which contains detailed examples. Most tax software will calculate this automatically if you enter your Social Security statement amount.

What counts as combined income

Combined income includes wages, self-employment income, interest, dividends, capital gains, rental income, and distributions from retirement accounts. It also includes income from a pension, annuity, or other retirement plan. Importantly, it includes nontaxable interest from municipal bonds, which many retirees hold.

Combined income does not include certain items: Supplemental Security Income (SSI) payments, veterans benefits, workers' compensation, or certain railroad retirement benefits. It also does not include Roth IRA conversions or may have access to charitable distributions if you are over 70½.

If you are married filing jointly, combined income includes your spouse's income as well, even if your spouse did not receive Social Security. This can push a couple over the threshold even if each person's individual income would not.

State taxation of Social Security

Thirteen states do not tax Social Security benefits at all: Alaska, Florida, Illinois, Iowa, Kentucky, Louisiana, Mississippi, Missouri, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. If you live in one of these states, you owe no state tax on your benefits regardless of your income level.

Most other states follow the federal rules closely, taxing Social Security the same way the IRS does. However, some states have different thresholds or different percentages. Colorado, for example, exempts Social Security from state tax for residents over 55. Connecticut and Kansas tax it but allow an exemption for lower-income retirees.

Check your state's department of revenue website or ask a tax preparer familiar with your state's rules. State rules change periodically, and what applied last year may not apply this year.

Withholding tax from your Social Security payment

If you expect to owe federal income tax on your benefits, you can ask the Social Security Administration to withhold money from your monthly payment. This prevents a large bill when you file your return.

To set up withholding, complete Form W-4V (Voluntary Withholding Request) and submit it to your local Social Security office, by mail, or online through your my Social Security account. You can choose to have 7, 10, 12, or 22 percent of your benefit withheld each month, or you can request a specific dollar amount.

Withholding is voluntary and you can change or stop it at any time. If your income changes significantly — for example, if you return to work or receive a large distribution from a retirement account — you may want to adjust your withholding.

What to do if you receive a large distribution from a retirement account

A one-time distribution from an IRA, 401(k), or other retirement plan can push your combined income well above the second threshold in that year, causing a much larger portion of your Social Security to become taxable than in other years. This is common when someone retires and rolls over a large account, or when they reach their required minimum distribution age.

You cannot avoid the tax, but you can plan for it. If you know a large distribution is coming, you might request additional withholding from your Social Security payment that year, or set aside money to pay the tax when you file. Some people spread distributions across two years to stay below the second threshold in each year, though this requires advance planning with a tax preparer.

may have access to charitable distributions (QCDs) offer one workaround if you are over 70½ and charitably inclined: money transferred directly from your IRA to a may have access to charity does not count as income and does not affect your Social Security taxation, even though it satisfies your required minimum distribution.

Frequently Asked Questions

If I work part-time and earn wages, does that affect my Social Security tax?

Yes. Wages count as part of your combined income. If your wages plus other income plus half your Social Security benefits exceed the first threshold, some of your benefits become taxable. This is one reason people sometimes find that working in retirement increases their tax bill more than the wages alone would suggest.

Can I reduce my combined income to avoid taxation?

You can reduce certain types of income. For example, if you have capital losses, you can use them to offset capital gains. If you have charitable intentions, a may have access to charitable distribution from an IRA does not count as income. However, you cannot simply choose not to report wages or other earned income, and you cannot avoid counting Social Security itself in the formula.

What if I disagree with the tax amount the IRS calculated?

Double-check the calculation using the IRS worksheet in Publication 915 or have a tax preparer review it. If you still believe an error was made, you can file an amended return (Form 1040-X) within three years. Keep records of your Social Security statement, your other income sources, and any correspondence with the IRS.

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

If your combined income is below the first threshold for your filing status, you have no federal tax liability and are not required to file. However, you may want to file anyway if you had taxes withheld, because you could receive a refund. Check the IRS filing requirements for your specific situation.

How do I know what my combined income is?

Start with your adjusted gross income from your tax return (or what it would be if you filed). Add any nontaxable interest and half your Social Security benefits. The Social Security Administration sends you a statement each year showing your benefit amount, which you can use to calculate half. If you use tax software, it will calculate combined income for you.