Social Security — Are Benefits Taxable?
Feb 19, 2015
If you thought Uncle Sam would forget about taxes on your Social Security retirement benefits, think again. When you have other income, up to 85% of your benefit could be taxable. Your “combined income” determines whether — and how much of — your benefits will be subject to federal income tax.
Your combined income comprises all the income you receive from any source, with only a few exceptions. Combined income includes wages and self-employment income; rental income; investment income, such as interest, dividends, and capital gains; income from pensions and retirement accounts (but not tax-free Roth distributions); and — here’s the kicker — even tax-exempt interest from municipal bonds. In addition, you have to add in half your Social Security benefits when you are figuring your combined income.*
You won’t pay taxes on your Social Security if:
- Your combined income is not more than $25,000 and your filing status is single or head of household
- Your and your spouse’s combined income is not more than $32,000 and you file a joint returnUp to 50% of benefits are taxable if you have combined
Up to 50% of benefits are taxable if you have combined income between:
- $25,000 and $34,000 (single/head of household)
- $32,000 and $44,000 (married joint)
Up to 85% of benefits are taxable if you have combined income of more than:
- $34,000 (single/head of household)
- $44,000 (married joint)
And if you’re a married taxpayer filing a separate return, you’ll probably have to pay taxes on your benefits.
- You have to take certain adjustments into account in the combined income calculation.