Is Social Security income taxable? How to calculate what you may owe

Social Security provides a vital source of income for millions of Americans, and many are surprised to learn that their benefits may be subject to income tax. Understanding when and how Social Security benefits are taxed can help retirees better manage their finances and avoid unexpected tax liabilities.

Learn about Social Security taxation, including income thresholds, filing statuses and specific calculations to maximize your after-tax income in retirement.

Social Security retirement, survivor and disability benefits may be taxable at the federal level if you have enough extra income in addition to your benefits. Supplemental security income (SSI) payments, however, are not taxable.

No taxpayer owes taxes on 100% of their Social Security benefits at the federal level. The amount of federal tax you owe on Social Security benefits depends on a figure called your combined income:

You calculate combined income by starting with your adjusted gross income (AGI), which is all your income (from sources like wages, self-employment, pensions, interest, dividends, business profit, etc.), minus what you receive for Social Security.

To find your combined income, take your AGI plus any nontaxable interest earned plus 50% of your Social Security benefits. You can find your benefit amount on your Social Security Benefit Statement (Form SSA-1099), issued each January.

Your adjusted gross income
+ Nontaxable interest
+ 50% of your Social Security benefits
= Your "combined income"

You may owe federal taxes on your Social Security income if your combined income exceeds the limits set by the IRS, which are based on your filing status:

• If your combined income is less than $25,000, your benefits are not taxable.
• If your combined income is between $25,000 and $34,000, up to 50% of your benefits may be taxable.
• If your combined income exceeds $34,000, up to 85% of your benefits may be taxable.
  

• If your combined income is less than $32,000, your benefits are not taxable.
• If your combined income is between $32,000 and $44,000, up to 50% of your benefits may be taxable.
• If your combined income exceeds $44,000, up to 85% of your benefits may be taxable.
  

• If you live apart from your spouse for the entire year and your combined income is less than $25,000, your benefits may not be taxed.
• Up to 50% of your benefits may be taxable if your combined income as an individual is between $25,000 and $34,000 and you lived apart for the entire year.
• Up to 85% of your benefit may be taxed if your combined income as an individual is more than $34,000 and you lived apart for the entire year OR you lived with your spouse at any time during the year (at any income level).

Working while on Social Security: Earning limits, taxes & more

Wondering if you can get Social Security benefits and work at the same time? The short answer is yes, you can. However, certain factors may affect the amount of your monthly Social Security benefit—like your age and your earnings.

Read more

To illustrate the Social Security benefit tax calculation, let's look at a simplified example. Say you're a single filer with $30,000 in adjusted gross income (not including Social Security benefits), $20,000 from Social Security and no nontaxable interest.

1. Determine your combined income. AGI ($30,000) + nontaxable interest ($0) + 50% of Social Security ($10,000) = $40,000.

2. Find your place in relation to the threshold. For single filers, up to 50% of benefits can be taxable if combined income is between $25,000 and $34,000. In this case, your combined income exceeds this threshold.

3. Calculate the taxable benefits. The taxable amount is the lesser of the following:

a. Half of your Social Security = $10,000

OR

b. Half of the difference between your combined income and the base amount ($40,000 - $25,000 = $15,000) = $7,500

In this case, the lower amount, $7,500, is included in your taxable income. This amount will be subject to your regular income tax rate.

Every household's circumstances, including filing status and personal finances, are unique. The IRS provides an online tool that calculates how much of your Social Security income is taxable. Actual calculations can be complex. Consult a tax professional for accurate and personalized advice.

Social Security benefit taxation by the states can vary. In 2024, nine states have at least some tax on Social Security benefits while most others generally don't tax benefits regardless of income. However, your state may have detailed rules. It's important to check your state's tax laws or consult a tax accountant.

These nine states may tax Social Security benefits based on income levels, age or other factors:

• Colorado — Allows some exemptions based on age and income.
• Connecticut — Taxation depends on filing status and income thresholds.
• Kansas — Exempts benefits for those with adjusted gross income (AGI) below a certain level.
• Minnesota — Taxes benefits similarly to how they are taxed at the federal level.
• Montana — Follows federal taxation rules but offers partial exemptions.
• New Mexico — Exempts benefits for certain income brackets.
• Rhode Island — Exempts benefits based on age and income.
• Utah — Taxes benefits similarly to how they are taxed at the federal level.
• Vermont — Provides partial exemptions depending on income.
  

These 41 states don't tax Social Security benefits:

• Alabama
• Alaska
• Arizona
• Arkansas
• California
• Delaware
• Florida
• Georgia
• Hawaii
• Idaho
• Illinois
• Indiana
• Iowa
• Kentucky
• Louisiana
• Maine
• Maryland
• Massachusetts
• Michigan
• Mississippi
• Missouri
• Nebraska
• Nevada
• New Hampshire
• New Jersey
• New York
• North Carolina
• North Dakota
• Ohio
• Oklahoma
• Oregon
• Pennsylvania
• South Carolina
• South Dakota
• Tennessee
• Texas
• Virginia
• Washington
• West Virginia (phasing out)
• Wisconsin
• Wyoming

When to claim Social Security: Maximize your benefits & tax efficiency

Wondering when you should start collecting Social Security? It's one of the most important decisions retirees face. Consider these factors, including age, health, marital status and taxes.

Dive into our guide to claiming Social Security

If you have to pay taxes on what you get from Social Security, you have a few options for the method of payment.

• Tax filing. Using Form 1040, you can report the amount from your Social Security statement and place that on line 6a.
• Quarterly estimated payments. You can make payments to the IRS four times per year.
• Withholding. You can withhold federal taxes from your Social Security benefits by completing a Voluntary Withholding Request, IRS Form W-4V. This allows you to have a portion of your benefits automatically withheld for taxes, similar to income withholding from a paycheck.
  

You can choose to have 7%, 10%, 12% or 22% of your benefits withheld from Social Security benefits. After completing IRS Form W-4V, you submit it to your local Social Security office, and the withholdings will be reflected in future payments. This can help prevent owing taxes when you file your tax return.

The fundamental strategy behind Social Security tax efficiency is to keep your total taxable income as low as possible. Ideally, you can try to reduce your combined income to be below the IRS threshold.

You may not be able to completely avoid paying taxes on Social Security, but there are a few ways to reduce the tax that you owe:

Because contributions to a Roth IRA are made with after-tax dollars, qualifying withdrawals are not taxable. You can withdraw contributions at any time without penalty. Withdrawals of earnings from a Roth IRA also are generally tax-free if they are made after age 59½ and the account has been active for at least five years.*

For some individuals and households, it can make sense to make withdrawals from taxable or tax-deferred accounts before receiving Social Security benefits. For example, if it makes sense for your retirement plan, you can withdraw from traditional IRAs, 401(k)s and taxable accounts for retirement income. If you execute this strategy correctly, you can reduce taxes and, by delaying Social Security, increase your benefits.

Annuities are financial products that combine insurance and savings into one. They can provide tax-deferred earnings and guaranteed income in retirement for as long as you live.