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Q&A: I am on Social Security Benefits. Will I be Taxed on This Income?

Social Security Tax

Question:

I am on Social Security benefits. Will I be taxed on this income?

Answer:

The federal taxability of your Social Security is based on a concept called provisional income and it's different than the standard federal income tax brackets.

Provisional income = adjusted gross income (without SS) + nontaxable income (muni bond interest) + 1/2 of your SS benefits.

For example, if for the tax year you have a $10,000 pension, $1,000 in taxable interest, $2,000 in tax-free municipal bond interest, $10,000 for part-time employment, a $7,000 IRA distribution, and $20,000 in Social Security benefits, your provisional income will be:

$10,000 + $1,000 + $2,000 + $10,000 + $7,000 + ($20,000/2) = $40,000

Here’s the breakdown for what’s includable in your federal taxable income:

  • No Social Security is included in taxable income for single filers with provisional income less than $25,000 or married filing jointly with less than $32,000
  • 50% of SS benefits included in taxable income for single filers with provisional income between $25,000-$34,000 or married filing jointly between $32,000-$44,000
  • 85% of SS benefits included in taxable income for single filers with provisional income over $34,000 or married filing jointly over $44,000

Most states don’t tax Social Security benefits but be sure to check the particulars for your state.