Social Security Income: Is It Taxable?

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Common question tax preparers receive concern the taxability of Social Security benefits. Depending on the level of other income, Social Security may be either tax-free or partially taxable. Recipients of Social Security can estimate the extent to which their benefits are taxable by considering their other sources of income.

In general, half of the Social Security income is first added to your other sources of income. That total amount is then compared with a designated threshold level for your filing status. If the amount is over the threshold, your Social Security income may be partially taxable. If you receive tax-exempt interest income, that amount is also included in the other income total.

The taxability of Social Security income is the same for younger recipients as it is for retirees. Some disabled individuals also receive benefits. If you receive benefits as the survivor of a deceased worker, your children may also receive payments. The Social Security payments for your children are considered their income and are not included in your calculation.

Individual threshold of $25,000

For tax returns reporting the income of one individual, the threshold is $25,000. The filing status options for individuals are

  • single
  • head of household
  • qualifying widow or widower
  • married filing separately

For a married person filing separately, the $25,000 threshold applies only if the married individuals lived apart for the entire year. If the two persons lived together for any portion of the year, the threshold is zero.

Married threshold of $32,000

The threshold is $32,000 for the status of married filing jointly. The income of both spouses is compared with the threshold, even if only one received Social Security payments.

A worksheet is included in the instructions for IRS Form 1040 to calculate the precise amount of taxable Social Security income. Tax preparation software automatically calculates the entry. The maximum percentage of Social Security income that may be taxed is 85 percent.

Each threshold has a corresponding higher amount at which a greater percentage of Social Security income is taxable. Beneficiaries with no income aside from Social Security payments might have no tax obligation since half of their benefit amount is under the threshold.

Form 1040 contains a specific line designated for reporting taxable Social Security income. The line contains two boxes. One box reports total Security Security payments received and the second box reports the taxable amount.

Contact a professional tax preparer, like Kevin S Hughes CPA, for further information about Social Security income or any other area of tax preparation.