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Posted by Jim McClaflin, EA, NTPI Fellow, CTRC

Is Social Security Income Taxable?

Is Social Security Income Taxable?

The federal-level collects taxes from Social Security income while the income level determines whether or not there is a need for a tax on the benefits. Those with the 401(k) or other retirement sources of income or part-time jobs are subject to Social Security benefits tax. However, those that live on their Social Security benefits are not under the federal tax, but state laws on Social Security income vary.


Is My Social Security Income Taxable?

The IRS publishes an easy way to check if your Social Security income is taxable. You're expected to add half of your Social Security benefits to your other income, including tax-exempt interest. In summary, combined income = nontaxable interest + adjusted gross income + half of your Social Security benefits. You'll be taxed if your combined income exceeds the base amount. 

A single filer, widow or widower, or head of household combined tax is not to be above $25,000, while a joint tax is not to go beyond $32,000. However, Social Security income is taxable for married couples filing taxes separately.


Individual Tax Rates

Individual benefits are taxable if filing federal tax return and if you combine income as follows:

  • You'll pay tax on 50% of your benefits if your gross income is between $25000 to $34,000.

  • You'll be taxed on 85% of your benefits if your gross income exceeds $34,000.

The IRS quickly calculates Social Security benefits through a worksheet. Benefits that are subjected to the federal tax return as individual and gross income are as follows:

Married Tax Rates

Married people on joint tax filing are subject to tax if you and your spouse earn a gross income as follows:

  • You'll have to pay tax on 50% of your benefits if your combined income is between $32,000 to $44,000.

  • You'll be paying tax on 85% of your benefits if your combined earnings are above $44,000.

Simplifying Your Social Security Taxes

Employers are known to hold back some payroll taxes. This method can be used on federal income tax when filing retirement taxes. You'll have to obtain a Form W-4V (Voluntary Withholding Request) to use this method. Filing the form required your personal information and the amount to be withheld from your benefits. However, you have to choose between 7%, 10%, 12%, or 22% monthly. Fill out the form and forward it to the Social Security Administration (SSA) office. The second option is to file estimated tax payments to enjoy full withholding payment. Estimated payments are taxes filed on income quarterly, which an employer cannot withhold. However, self-employed individuals cannot enjoy this benefit.  

But a retiree can easily enjoy the benefit of the complicated estimated taxes. However, you can interchange strategies with personal situations.

How to Pay Taxes on Social Security

Social Security tax debtors are expected to refund in some ways. 

  • You can make payments every Tax Day and ensure you pay estimated taxes quarterly if you think you owe taxes. 

  • You can also withhold federal taxes from your Social Security benefits like it is practiced on paychecks when you are still employed. This method is possible through Form W-4V. The form is a voluntary withholding form filed and mailed to a Social Security office. Then you can choose the withholding percentage on your payment. 

To be on the safe side, it is best to know when to start enjoying your Social Security benefits. The best time to leverage the benefits is when you're 70. Another focus is to prevent your Social Security benefits from causing a loophole in your retirement income. Avoiding these mistakes requires planning to minimize tax troubles after retirement.



Jim McClaflin, EA, NTPI Fellow, CTRC
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