A portion of your Social Security (SS) benefits may be subject to federal taxation according to rates set by the U.S. tax brackets. Your tax bracket is determined by your net taxable income as shown on your Form 1040. Your taxable income is your gross income minus all allowable deductions.
You may be subject to income tax on up to 85% of your benefits when your Social Security income is combined with your other income.
Key Takeaways
- Up to 85% of Social Security income benefits can be taxed depending on your total annual income.
- Thresholds for federal income tax brackets, as well as Social Security income limits, are published by the Internal Revenue Service (IRS) each year.
- You can review IRS Publication 915 for the process of calculating income tax due on your benefits.
- Several states also tax Social Security income.
What Portion of Benefits Is Subject to Income Tax?
Earned income between $25,000 and $34,000 will require an individual filer to pay federal income tax on up to 50% of benefits. You may have to pay income tax on up to 85% of your benefits if you earn more than $34,000. These thresholds increase to $32,000 and $44,000 if you're married and you file a joint return with your spouse. Married couples wholive together but file separatelywill most likely pay taxes on all their benefits.
You can review IRS Publication 915 for the process of calculating this amount. You must include your Social Security benefits on your Form 1040 tax return as ordinary income after calculating the appropriate amount.
An individual whose only source of income is Social Security doesn't have to pay federalincome tax on their benefits. A taxpayer who receives other sources of income such astax-exempt interest must add one-half of their annual Social Security benefits to their other income and then compare the result to a threshold set by the IRS. Some Social Security benefits aretaxable if the total is more than the IRS threshold.
What Is Ordinary Income?
Ordinary income represents most of your household's taxable income from sources such as wages, self-employment, pensions, Social Security benefits, rents, royalties, and interest.
Income from your 401(k) does not count as taxable income.
Other forms of household income such as capital gains and qualified dividends are not considered ordinary income. They're taxed at different rates.
How Is Ordinary Income Taxed?
All sources of ordinary income are added together and then all allowable deductions are subtracted from this total. What remains is subject to tax using the federal tax brackets and IRS tax tables.
The 2023 tax year figures are:
- 10% for income of $11,000 or less ($22,000 for married couples filing jointly)
- 12% for incomes over $11,000 ($22,000 for married couples filing jointly)
- 22% for incomes over $44,725 ($89,450 for married couples filing jointly)
- 24% for incomes over $95,375 ($190,750 for married couples filing jointly)
- 32% for incomes over $182,100 ($364,200 for married couples filing jointly)
- 35% for incomes over $231,250 ($462,500 for married couples filing jointly)
- 37% for income over $578,125 ($693,750 for married couples filing jointly)
The 2024 tax year figures are:
- 10% for income of $11,600 or less ($23,200 for married couples filing jointly)
- 12% for incomes over $11,600 ($23,200 for married couples filing jointly)
- 22% for incomes over $47,150 ($94,300 for married couples filing jointly)
- 24% for incomes over $100,525 ($201,050 for married couples filing jointly)
- 32% for incomes over $191,950 ($383,900 for married couples filing jointly)
- 35% for incomes over $243,725 ($487,450 for married couples filing jointly)
- 37% for incomes over $609,350 ($731,200 for married couples filing jointly)
States That Tax Social Security Benefits
Most states do not tax Social Security benefits but 12 did so under certain circ*mstances as of tax year 2023, the return you'll file in 2024: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, and West Virginia. Missouri and Nebraska will no longer do so beginning in 2024, however.
- Colorado excludes some pension and annuity payments from income taxes, including Social Security benefits. Residents who are at least age 55 as of the last day of the tax year can exclude up to $20,000. Those who have reached the age of 65 can exclude $24,000.
- Connecticut exempts Social Security benefits if you're a single filer with an income of less than $75,000. The exemption is $100,000 before benefits are taxed if you're married filing jointly.
- Kansas fully exempts benefits, regardless of filing status, if your federal adjusted gross income is less than $75,000.
- Minnesota residents can subtract the greater of two calculated amounts from their income. Individuals with adjusted gross incomes of less than $100,000 for married returns or $78,000 for single returns are exempt.
- Missouri benefits are exempt for beneficiaries who have reached the age of 62 if their income is less than $85,000 or $100,000 if they're married and filing jointly for tax year 2023. However, the tax on Social Security benefits is eliminated in tax year 2024.
- Montana taxes on Social Security benefits. A 2023 bill, HB0526, proposed repealing the state tax but it didn't pass.
- Nebraska will phase out taxes on Social Security benefits by 2025.
- New Mexico has changed its laws so most Social Security recipients will be exempt from paying taxes on their benefits. This includes those with adjusted gross incomes of less than $100,000 for individuals, $150,000 for couples filing jointly, and $75,000 for married couples filing separately.
- Rhode Island offers a tax modification based on federal adjusted gross income for those who have reached full retirement age. This is either 66 or 67 depending on your year of birth. The limits are $101,000 for single filers and $126,250 for married couples filing jointly as of tax year 2023, the return you'll file in 2024.
- Vermont offers an exemption for single filers with adjusted gross incomes below $45,000. This increases to $60,000 for married taxpayers and civil union partners who file joint returns.
- Utah offers a non-refundable tax credit of up to $450 against retirement income. The credit phases out at $25,000 for single filers and $32,000 for married couples filing jointly but it drops to $16,000 for those filing separate married returns.
How Much of My Social Security Income Is Taxable?
You may be required to pay federal income tax on up to 50% of your Social Security benefits if you're filing as an individual and your combined Social Security and earned income is between $25,000 and $34,000. You may be liable for income tax up to 85% of your benefits if the total is more than $34,000.
At What Age Is Social Security No Longer Taxable?
There's no age at which Social Security is no longer taxable. Social Security will always be taxable depending on the total taxable income you earn in retirement.
Does Everyone Pay the Same Rate for Social Security Tax?
Everyone pays the same rate for the Social Security tax. The rate is 12.4%, half of which is paid by the employee (6.2%) and half by the employer (6.2%). You must pay the full 12.4% if you're self-employed. All taxpayers pay the Social Security tax up to incomes of $160,200 in 2023, increasing to $168,600 in 2024. Income over these thresholds is not taxed for Social Security.
The Bottom Line
You may be subject to tax on your Social Security income depending on your overall income. Your Social Security benefits are combined with your other taxable income to determine if your Social Security benefits are taxable. You may be subject to income tax on up to 85% of your Social Security benefits.
