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Is my Social Security Taxable?

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If you receive Social Security benefits, you may have to pay federal income tax on part of your benefits.

How do I know if I have to pay income tax on my benefits?

It depends on how much total income you report to the IRS.

 

About 70% of all social security beneficiaries do not pay tax on their social security income. 

However, if you’re part of the other 30%, about 18 million Americans, you do have to pay tax on your social security income. But how much?

The IRS has a formula that determines if your social security is taxable. Let’s take a look:

The first question is: What is your filing status: single, head of household, married filing joint, etc.?

Example 1: If you’re filing as single or head of household

Take 50% of your social security benefits and add it to your “other income”. This contains your pensions, wages, interest, dividends, and capital gains.

How the formula works:

Social Security Benefits: $10,000

Interest Income: $15,000

Dividends: $10,000

50% of SS benefits + Interest + Dividends

$5,000 + $15,000 + $10,000 = $30,000

This $30,000 is your “provisional income”.

You then compare your provisional income to the IRS’s base amounts of $25,000 and $34,000.

  • If“provisional income” is less than $25,000, then your social security benefits are NOT taxable.
  • If “provisional income” is between $25,000 and $34,000, then 50% of your social security income is taxable.
  • If “provisional income” is more than $34,000, then 85% of your social security income is taxable.

In this example, the $30,000 “provisional income” is between $25,000 and $34,000, so 50% of your social security income is taxable.

Example 2: If you’re filing as married filing joint

Take 50% of total social security benefits and add it to your “other income”.

How the formula works:

Social Security Benefits of Husband: $10,000

Social Security Benefits of Wife: $16,000

Interest Income of Husband: $10,000

Capital Gains of Wife: $7,000

50% of total SS benefits + Interest + Capital Gains

$13,000 + $10,000 + $7,000 = $30,000

This $30,000 is your “provisional income”.

You then compare your “provisional income” to the IRS’s base amounts of $32,000 and $44,000. The base amounts are higher for married filing joint.

If “provisional income” is less than $32,000, then your social security benefits are NOT taxable

If “provisional income” is between $32,000 and $44,000, then 50% of your social security income is taxable.

If “provisional income” is more than $44,000, then 85% of your social security income is taxable

In this example, the $30,000 “provisional income” is less than $32,000, so your social security benefits are NOT taxable

If you have more questions, join us at LatinoTaxFest to get all of your tax questions answered.

Antonio C. Martinez, EA