Social Security income is generally taxable at the federal level, though whether or not you have to pay taxes on your Social Security benefits depends on your income level. If you have other sources of retirement income, such as a 401(k) or a part-time job, then you should expect to pay some income taxes on your Social Security benefits. If you rely exclusively on your Social Security checks, though, you probably won’t pay taxes on your benefits. Regardless, it can be helpful to work with a financial advisor who can help you understand how different sources of retirement income are taxed.
Your Social Security benefits could be taxable, depending on your situation. According to the IRS, the best way to see if you’ll owe taxes on your Social Security income is to take one-half of your Social Security benefits and add that amount to all your other income. This includes tax-exempt interest. This number is known as your combined income, and this is how it’s calculated:
Combined Income = Adjusted Gross Income (AGI) + Nontaxable Interest + 1/2 of Social Security Benefits
If your combined income is above a certain limit (the IRS calls this limit the base amount), you will need to pay at least some tax. The limit for 2023 and 2024 is $25,000 if you are a single filer, head of household or qualifying widow or widower with a dependent child. The 2023 and 2024 limit for joint filers is $32,000. However, if you’re married and file separately, you’ll likely have to pay taxes on your Social Security income.
If your Social Security income is taxable, the amount you pay will depend on your total combined retirement income. However, you’ll never pay taxes on more than 85% of your Social Security income, though the income brackets will vary by filing status.
If you file your income tax return as an individual with a total income that’s less than $25,000, you won’t have to pay taxes on your Social Security benefits. Single filers with a combined income of $25,000 to $34,000 must pay income taxes on up to 50% of their Social Security benefits. If your combined income is more than $34,000, you will pay taxes on up to 85% of your Social Security benefits.
Do you need help figuring out your required minimum distributions? Try SmartAsset’s RMD calculator to learn more.
For married couples filing a joint return, you’ll pay taxes on up to 50% of your Social Security income if you have a combined income of $32,000 to $44,000. If you have a combined income of more than $44,000, you can expect to pay taxes on up to 85% of your Social Security payments.
If 50% of your benefits are subject to tax, the exact amount you include in your taxable income (meaning on your Form 1040) will be the lesser of either:
For example, let’s say you’re a single filer who receives a monthly benefit of $1,827, which is the average benefit for 2023. Your total annual benefits would be $21,924. Then let’s say you have a combined income of $30,000.
Half of your total benefits would be $10,962. The difference between your combined income and the base tax bracket (which is $25,000 for single filers) is $5,000. So the taxable amount that you would enter on your federal income tax form is $2,500, because it’s lower than half of your annual Social Security benefit and is half of the difference between your combined income and the base IRS amount.
The example above is for someone who’s paying taxes on 50% of their Social Security benefits. Things get more complex if you’re paying taxes on 85% of your benefits. However, the IRS helps taxpayers by offering software and a worksheet to calculate Social Security tax liability.
Once you calculate the amount of your taxable Social Security income, you’ll need to enter that amount on your income tax form. Luckily, this part is easy. First, find the total amount of your benefits. This will be in box 3 of your Form SSA-1099. Then, on Form 1040, you will write the total amount of your Social Security benefits on line 5a and the taxable amount on line 5b.
Everything above is about your federal income taxes, which comprise the majority of your taxes. Depending on where you live, you may also have to pay state income taxes.
There are 12 states that collect taxes on at least some Social Security income. Two of those states (Minnesota and Utah) follow the same taxation rules as the federal government. So if you live in one of those two states, then you’ll pay the state’s regular income tax rates on all of your taxable benefits (that is, up to 85% of your benefits).
The other states also follow the federal rules, but offer deductions or exemptions based on your age or income. So in those nine states, you likely won’t pay tax on the full taxable amount. The other 38 states plus Washington, D.C. do not tax Social Security income. Here’s a complete breakdown of the states that do and don’t tax Social Security:
| Taxed According to Federal Rules | Minnesota, Utah |
| Partially Taxed (Exemptions for Income and Age) | Colorado, Connecticut, Kansas, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Vermont, West Virginia |
| No State Tax on Social Security Benefits | Alabama, Alaska, Arizona, Arkansas, California, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Nevada, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Virginia, Washington, Wisconsin, Wyoming |
If you’re concerned about your income tax burden in retirement, consider saving in a Roth IRA. Unlike many other retirement accounts, you save with after-tax dollars in a Roth IRA. Because you pay taxes on the money before contributing it to your Roth IRA, you will not pay any taxes when you withdraw your contributions.
You also don’t have to withdraw the funds on any specific schedule after you retire. This differs from distributions in traditional IRAs and 401(k) plans. These instead require you to begin withdrawals once you reach 72 or 73 years old, depending on when you turn 72 (if you turn 72 in 2023 or 2024, then your age is 73).
So, when you calculate your combined income for Social Security tax purposes, your withdrawals from a Roth IRA won’t count as part of that income. That could make a Roth IRA a great way to increase your retirement income without increasing your taxes in retirement.
Many retirement plans also allow individuals aged 50 years or older to make annual catch-up contributions. You can make catch-up contributions of up to $1,000. These must be completed by the due date of your tax return. You have until Tax Day to make the catch-up contribution apply to your previous year.
During your working years, your employer probably withheld payroll taxes from your paycheck. If you make enough in retirement that you need to pay federal income tax, then you’ll also need to withhold taxes from your monthly income.
To withhold taxes from your Social Security benefits, you’ll need to fill out Form W-4V (Voluntary Withholding Request). The form only has seven lines. You will need to enter your personal information and then choose how much to withhold from your benefits. The only withholding options are 7%, 10%, 12% or 22% of your monthly benefit. After you fill out the form, mail it to an SSA office or drop it off in person.
If you prefer to pay more exact withholding payments, you can choose to file estimated tax payments instead of having the SSA withhold taxes. Estimated payments are tax payments that you make each quarter on income that an employer is not required to withhold tax from. So if you ever earned income from self-employment, you may already be familiar with estimated payments.
In general, it’s easier for retirees to have the SSA withhold taxes. Estimated taxes are a bit more complicated and will simply require you to do more work throughout the year. However, you should make the decision based on your personal situation. At any time you can also switch strategies by asking the SSA to stop withholding taxes.
We all want to pay as little in taxes as possible. This is especially true in retirement when most of us have a set amount of savings. But if you have enough retirement income that you’re paying taxes on Social Security, you’re probably doing well. It means you have income from other sources and you’re not entirely dependent on Social Security to meet living expenses. You can also save on your taxes in retirement simply by having a plan.
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Amelia JosephsonAmelia Josephson is a writer passionate about covering financial literacy topics. Her areas of expertise include retirement and home buying. Amelia's work has appeared across the web, including on AOL, CBS News and The Simple Dollar. She holds degrees from Columbia and Oxford. Originally from Alaska, Amelia now calls Brooklyn home.
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