Social Security taxable? Explaining income limits, SSI rules

As taxpayers put together to file their returns over the following a number of months, VERIFY is answering your tax season questions. 

We’ve already damaged down what households ought to know in regards to the baby tax credit score in 2023 and supplied choices for submitting your taxes freed from cost. 

Some VERIFY readers need to know whether or not they’ll should pay taxes on sure authorities advantages they obtain. Harry requested if Social Security funds are taxable. 

Are Social Security advantages taxable?

Yes, Social Security advantages are taxable for individuals who meet sure income necessities.

All income is taken into account taxable except it’s exempted by regulation, the IRS says. Some of these exemptions embody inheritance, presents, loss of life insurance coverage and life insurance coverage, in line with Mark Steber, chief tax information officer at Jackson Hewitt.

When it involves Social Security, you’ll have to pay federal taxes on a portion of your advantages in case your income falls inside sure ranges. These advantages embody month-to-month retirement, survivor and incapacity advantages. Supplemental Security Income (SSI) funds are by no means taxed, the IRS says. 

No one who receives Social Security funds pays taxes on their full profit quantity, Steber stated. But you’ll should pay extra as your income will increase.

Here’s the breakdown of how a lot of your Social Security advantages might be federally taxed based mostly in your income:

Up to 85% of your advantages are taxable if:

• Half of your Social Security advantages plus all different income is greater than $34,000 for people.
• Half of your Social Security advantages plus all different income is greater than $44,000 for a married couple submitting collectively. 

Example: If an individual acquired $10,000 in Social Security advantages final 12 months and made $35,000 whole, they’d pay federal taxes on $8,500 of these advantages, along with their different income. 

50% of your advantages are taxable if:

• Half of your Social Security advantages plus all different income is between $25,000 to $34,000 for people.
• Half of your Social Security advantages plus all different income is between $32,000 to $44,000 for a married couple submitting collectively.

Example: If an individual acquired $10,000 in Social Security advantages final 12 months and made $30,000 whole, they’d pay federal taxes on $5,000 of these advantages, along with their different income. 

None of your Social Security advantages are taxable if:

The above rules apply to federal income taxes. Twelve states additionally tax some or all of residents’ Social Security advantages, in line with AARP. You can discover more information about individual states here. 

The IRS has an online tool that may show you how to decide whether or not your advantages are taxable.

There are choices for paying federal income taxes in your Social Security advantages, AARP says. You can both file quarterly estimated tax returns with the IRS, ask Social Security to withhold federal taxes out of your profit fee, or you may pay the complete quantity at tax time.