Whether your Social Security is taxed depends on your other income
Social Security benefits may be subject to federal income tax, but only if your total income exceeds a certain threshold. The IRS uses a formula based on your combined income — not just your benefits — to determine how much, if any, of your benefits count as taxable income. Most people who receive Social Security do not pay federal tax on it, but those with substantial income from work, pensions, investments, or other sources often do.
The tax treatment also varies by state. Some states do not tax Social Security at all, while others tax it under their own rules even if the federal government does not. Your filing status and the type of income you receive matter as well.
Key Takeaways
- Federal taxation of Social Security depends on your combined income, which includes half your benefits plus all other income sources.
- If your combined income stays below the first threshold ($25,000 for single filers, $32,000 for married filing jointly), your benefits are not taxed federally.
- Between the first and second threshold, up to 50 percent of your benefits may be taxable; above the second threshold, up to 85 percent may be taxable.
- Fourteen states tax Social Security benefits under their own rules, though most offer exemptions based on age or income level.
- You can request that the Social Security Administration withhold federal income tax from your monthly benefit payment to avoid a tax bill at filing time.
How the IRS calculates combined income
The IRS does not straightforward add up your benefits and other income. Instead, it uses a specific calculation called combined income, which equals your adjusted gross income (AGI) plus any nontaxable interest plus half of your Social Security benefits for the year.
For example, if you received $20,000 in Social Security benefits and $15,000 in pension income, your combined income would be $15,000 plus $10,000 (half your benefits) equals $25,000. This combined income figure is what determines whether any of your benefits are taxable, not the $35,000 total you actually received.
Common sources of income that count toward combined income include wages from work, self-employment income, taxable interest and dividends, capital gains, distributions from retirement accounts, pension payments, and rental income. Nontaxable interest from municipal bonds also counts, even though it is not taxed as income.
The two-tier threshold system
The IRS uses two income thresholds to determine how much of your benefits are taxable. These thresholds have not changed since 1984 and do not adjust for inflation.
| Filing Status | First Threshold | Second Threshold |
|---|---|---|
| Single | $25,000 | $34,000 |
| Married filing jointly | $32,000 | $44,000 |
| Married filing separately | $0 | $0 |
If your combined income is below the first threshold, none of your Social Security benefits are taxable. If your combined income falls between the first and second threshold, up to 50 percent of your benefits may be taxable. If your combined income exceeds the second threshold, up to 85 percent of your benefits may be taxable.
The actual amount taxed is determined by a formula that compares your income to the thresholds. You do not automatically pay tax on 50 percent or 85 percent of your benefits; the formula calculates the exact portion based on how far your income exceeds each threshold.
State taxation of Social Security benefits
Fourteen states currently tax Social Security benefits: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, and West Virginia. However, most of these states offer exemptions or reduced taxation based on age or income level.
Colorado, Kansas, and Nebraska tax Social Security the same way the federal government does, using combined income thresholds. Connecticut, Minnesota, Missouri, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia use their own rules, which often include age-based exemptions (typically for people 55 or older) or income limits that exclude lower-income retirees from taxation.
If you live in one of these states, check your state tax authority's website or contact them directly to understand how your specific situation is treated. State rules change periodically, and some states have pending legislation that could affect taxation of Social Security.
Requesting federal tax withholding from your benefits
You can ask the Social Security Administration to withhold federal income tax from your monthly benefit payment. This prevents a large tax bill when you file your return and can simplify your tax situation if you expect to owe tax on your benefits.
To request withholding, complete Form W-4V (Voluntary Withholding Request) and submit it to your local Social Security office, mail it to the address on the form, or upload it through your my Social Security account online. You can choose to have 7, 10, 12, or 22 percent of your monthly benefit withheld, or you can specify a flat dollar amount.
You can change or stop withholding at any time by submitting a new Form W-4V. If you do not request withholding and you owe tax on your benefits, you can also make estimated tax payments directly to the IRS throughout the year.
Reporting Social Security on your tax return
The Social Security Administration sends you a Form SSA-1099 each January showing the total benefits you received in the previous year. You use this form to report your benefits on your federal tax return.
If you are required to file a federal return and your combined income exceeds the first threshold, you must report your Social Security benefits on your return. The IRS provides a worksheet in the instructions for Form 1040 to calculate the taxable portion. Many tax software programs also calculate this automatically when you enter your SSA-1099 information.
If you file a state return in one of the fourteen states that tax Social Security, you will also need to report your benefits according to that state's rules, which may differ from the federal calculation.
Planning to reduce taxation of benefits
Because combined income determines taxation of Social Security, some retirees structure their income to stay below the thresholds. Common strategies include timing the withdrawal of funds from retirement accounts, managing investment income, or delaying the start of Social Security if you are still working.
If you are still working and receiving Social Security before your full retirement age, you should also be aware of the earnings test, which temporarily reduces your benefits if your work income exceeds a certain amount. This is separate from taxation but affects how much you actually receive each month.
Because tax planning depends on your individual situation, many people find it helpful to work with a tax professional or financial advisor who can review your specific income sources and filing status.
Frequently Asked Questions
Can I avoid paying tax on my Social Security benefits?
If your combined income stays below the first threshold ($25,000 for single filers, $32,000 for married filing jointly), your benefits are not taxed federally. If your income exceeds that threshold, some portion of your benefits will likely be taxable, but you cannot avoid it entirely through the tax code.
Does the earnings test count as income for taxation purposes?
No. The earnings test reduces your benefit payment if you work before reaching full retirement age, but the reduction happens before you receive the money. Only the benefits you actually receive count as income for tax purposes.
What if I receive both Social Security and a pension?
Both count toward your combined income. The pension is included in full, and half your Social Security benefits are added to it. If the total exceeds your threshold, part of your benefits become taxable.
Do I have to file a tax return if my only income is Social Security?
Generally, no — 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 federal income tax withheld, because you could receive a refund.
How do I know if my state taxes Social Security?
Check your state tax authority's website or call their helpline. The fourteen states that tax Social Security are Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, West Virginia, and Kansas. Most offer age or income exemptions.