10/19/2017

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Paying Tax On Social Security Income

The more Social Security income you receive, the more likely you will have to pay tax on it.

Throughout your working years, you pay into the Social Security Trust Fund so you will have a lifeline when you retire, are injured or become too ill to work, or if you die and leave minor dependents, or dependents who are mentally or physically unable to work.

As a person who tries to do all the right things to insure a source of income when you grow older, the last thing you want to hear is that you will have to pay taxes on your Social Security income. But as you will learn, the more you receive in benefit income, the more likely you will have to pay taxes on it.

There are scenarios in which your Social Security income is safe from the IRS and state and local taxing authorities. This is true if you file your Federal taxes as an individual making a total income of less than $25,000 a year or if you and your spouse file a joint tax return showing a total income of less than $32,000 per year.

As a single person with benefit income between $25,000 and $34,000, you will have to pay income tax on up to 50 percent of your Social Security benefits. The same applies to couples with benefit income between $32,000 and $44,000.

If you are single and have combined income of over $34,000, the IRS will tax you on up to 85 percent of your benefit. For married couples, the same is true if you receive combined benefit income over $44,000.

Social Security benefits may not be taxed if the only income you received during the tax year was your social security or equivalent railroad retirement benefits. In such case, you may not have to file a tax return for that particular year.

If you would like to determine if your benefits are likely to be taxed, use the Internal Revenue Service (IRS) Notice 703 shown on the back of the Social Security Benefit Statement, SSA Form 1099.

Some states tax Social Security benefits while other do not. The Social Security Administration does not have the authority to withhold taxes for states or local jurisdictions. To find out if your state requires taxes to be paid on your Social Security income, contact the taxing authority for your state.

Social Security is a very important investment so it is a good idea to stay on top of the status of your benefits as you pay into the fund. Changes are made periodically that may have an effect on your short term and long term retirement goals.

Contact your local Social Security Administration Office for information about whether or not your will have to pay taxes on your benefits.

 

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