Did you know that if you are receiving Social Security Benefits, you may have to pay federal income tax on a portion of these benefits? The amount you have to pay will depend on your specific income and filing status.
To find out if your Social Security benefits are taxable and you are single, take one-half of the Social Security money you received throughout the year and add it to your other income, which includes pensions, wages, interest, dividends, and capital gains. If the total comes to more than $25,000, then part of your benefits may be taxable.
If you are married filing jointly, take half of the Social Security money you received throughout the year, plus half of your spouse’s Social Security benefits, and add both of those amounts to your combined household income. If the total is more than $32,000, then part of your benefits may be taxable.
On their website, the IRS then lays out the percentage of benefits that are taxable based on the above calculation. These percentages vary between 50% to 85% and depend on your filing status and income levels. For example, if you are filing single with $25,000 – $34,000 income, 50% of your Social Security benefits may be taxable.
The Interactive Tax Assistant on IRS.gov can help you determine if your Social Security benefits are taxable and if so, by how much.
* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.
Tip adapted from IRS.gov7
7. IRS.gov, February 26, 2021