You may owe federal income tax on your Social Security benefits, but most people do not

Whether you pay tax on Social Security depends on your total income for the year. The Internal Revenue Service (IRS) uses a formula based on your combined income — which includes your Social Security benefits, wages, interest, dividends, and certain other sources — to determine if any of your benefits are taxable. If your combined income stays below a certain threshold, you owe no federal tax on your benefits. If it exceeds that threshold, you may owe tax on up to 85 percent of your benefits.

The thresholds are the same whether you are single or married filing jointly, but they have not changed since 1984. This means that as your income grows over time, you are more likely to cross into taxable territory even if your actual Social Security payment stays the same.

Key Takeaways

  • The IRS taxes Social Security benefits only if your combined income — benefits plus other income — exceeds $25,000 for single filers or $32,000 for married couples filing jointly.
  • Combined income is calculated by adding your adjusted gross income, nontaxable interest, and half of your Social Security benefits together.
  • If you are taxed, the IRS taxes up to 85 percent of your benefits, not 100 percent, and the amount depends on how far your income exceeds the threshold.
  • You can reduce the amount of tax withheld from your benefits by filing Form W-4V with the Social Security Administration, or you can make estimated tax payments to the IRS instead.
  • State taxes on Social Security vary by state; some states do not tax benefits at all, while others tax them the same way the federal government does.

How the IRS calculates combined income

The IRS starts with your adjusted gross income (AGI), which is the number on your tax return after you subtract certain deductions like educator expenses or student loan interest. Then it adds back any nontaxable interest you earned — for example, interest from municipal bonds — and adds half of your Social Security benefits.

That total is your combined income. The IRS compares it to two thresholds. If you are single and your combined income is $25,000 or less, none of your benefits are taxable. If you are married filing jointly, the threshold is $32,000. If your combined income falls between $25,000 and $34,000 (single) or between $32,000 and $44,000 (married filing jointly), you may owe tax on up to 50 percent of your benefits. If your combined income exceeds $34,000 (single) or $44,000 (married filing jointly), you may owe tax on up to 85 percent of your benefits.

The exact amount you owe depends on how much your combined income exceeds the first threshold. The IRS uses a worksheet to calculate this; the Social Security Administration provides the worksheet in Publication 915, which you can read from the IRS website.

The difference between federal and state taxes

Federal tax on Social Security is separate from state income tax. Thirteen states tax Social Security benefits to some degree: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, and West Virginia. The rules in each state differ. Some states use the same federal thresholds; others set their own. Some states tax only benefits above a certain age or income level.

Thirty-seven states and the District of Columbia do not tax Social Security benefits at all, regardless of your income. If you live in one of those states, you will not owe state tax on your benefits even if you owe federal tax.

You can find your state's specific rules by contacting your state tax authority or visiting its website. The Social Security Administration also publishes a state-by-state summary on its website.

How to reduce or avoid withholding

If you know you will owe tax on your benefits, you have two main options: have the IRS withhold tax from your monthly benefit payment, or make estimated tax payments directly to the IRS.

To set up withholding, fill out Form W-4V (Voluntary Withholding Request) and send it to your local Social Security office. You can choose to have the IRS withhold 7, 10, 15, or 22 percent of your monthly benefit, or you can specify a dollar amount. The Social Security Administration will then deduct that amount from your check each month and send it to the IRS on your behalf.

If you prefer not to have money withheld, you can make quarterly estimated tax payments to the IRS instead. This requires you to calculate your expected tax liability for the year and send payments to the IRS in April, June, September, and January. Form 1040-ES walks you through the calculation.

What happens if you do not withhold or pay estimated taxes

If you owe tax on your benefits and do not have it withheld or make estimated payments, you will owe the full amount when you file your tax return. The IRS may also charge you a penalty for underpayment of estimated tax if your withholding or payments fall short of what you owed.

The penalty is calculated based on how much you underpaid and for how long. You can avoid the penalty if your total withholding and estimated payments equal at least 90 percent of your 2024 tax liability, or 100 percent of your 2023 tax liability (whichever is smaller). If you are 65 or older, the threshold is slightly lower: 100 percent of your prior-year tax or 110 percent if your prior-year adjusted gross income was more than $150,000.

Working while receiving benefits and taxes

If you are under full retirement age and still working, your combined income will almost certainly be high enough to trigger taxation of your benefits. Wages from employment count toward combined income just like any other income source.

Additionally, if you earn wages before reaching full retirement age, Social Security will reduce your benefit payment itself — separate from any tax you owe. For every $2 you earn above the annual earnings limit (which changes each year), Social Security withholds $1 from your benefit. Once you reach full retirement age, this earnings limit no longer applies, and you can work without any reduction to your benefit.

Frequently Asked Questions

Do I have to file a tax return if my only income is Social Security?

Not necessarily. If Social Security is your only income and it is below the filing threshold for your age and filing status, you do not have to file. However, you may want to file anyway if you had taxes withheld, because you could receive a refund. The IRS website has a tool to help you determine whether you must file.

Can I reduce my combined income to avoid taxes on Social Security?

You can reduce your adjusted gross income by maximizing certain deductions — for example, by contributing to a traditional IRA or claiming deductible losses — but half of your Social Security benefits will still be added back into the combined income calculation. There is no way to completely avoid the formula, though lowering other income sources does lower your combined income.

What if I receive both Social Security and a pension?

Pensions count as part of your adjusted gross income, so they increase your combined income and make it more likely that your Social Security benefits will be taxable. The tax treatment of the pension itself depends on whether it is from a government employer or a private employer, but either way it adds to the total income the IRS uses to calculate Social Security taxation.

Does Roth IRA income count toward combined income?

Withdrawals from a Roth IRA do not count toward combined income for Social Security tax purposes, which is one advantage of Roth accounts in retirement. However, the earnings you used to fund the Roth — wages or other income — did count in the year you earned it.