Critter Corner: Do I Pay Taxes on my Social Security Benefits?

Dear Ribbit

I retired last year, and started receiving Social Security payments. Do I have to pay taxes on my Social Security benefits?

Rita Iremint

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Dear Rita,

Originally, Social Security benefits weren’t subject to taxes. But, as part of a “Save Social Security” plan, Congress decided to tax up to 50% of benefits. Later, lawmakers decided to tax up to 85%, with the extra revenue going towards Medicare.

Now, not everyone pays taxes on their Social Security benefits and everyone gets 15% of their benefits tax-free. But if, for example, you have retirement income from other sources (a 401(k), a pension, a part-time job), your income will probably be over the limits set by the Social Security Administration for tax-free benefits. That means you could pay taxes on up to 85% of your Social Security income.

According to the IRS website, to find out whether any of your benefits may be taxable, compare the base amount for your filing status with the total of:

  • One-half of your benefits; plus
  • All of your other income, including tax-exempt interest.

There are resources to help you figure this out, that I will provide at the end of this post. As a rule of thumb, the base amount for your filing status is:

  • $25,000 if you’re single, head of household, or qualifying widow(er),
  • $25,000 if you’re married filing separately and lived apart from your spouse for the entire year,
  • $32,000 if you’re married filing jointly,
  • $0 if you’re married filing separately and lived with your spouse at any time during the tax year.

If you’re married and file a joint return, you and your spouse must combine your incomes and Social Security benefits when figuring the taxable portion of your benefits. Even if your spouse didn’t receive any benefits, you must add your spouse’s income to yours when figuring on a joint return if any of your benefits are taxable.

You can figure the taxable amount of the benefits in Are My Social Security or Railroad Retirement Tier I Benefits Taxable?, on a worksheet in the Instructions for Form 1040, Instructions for Form 1040A, or in Publication 915, Social Security and Equivalent Railroad Retirement Benefits. Additional Information on this topic can be found at Tax Topic 423 – Social Security and Equivalent Railroad Retirement Benefits.

Hop this is helpful!

Ribbit

 

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