Does My Social Security Income Require Taxes?

The basic response is yes: Depending on your income level, you may or may not have to pay taxes on your Social Security benefits. Social Security income is normally taxable at the federal level. You should prepare to pay income taxes on your Social Security benefits if you have other retirement income sources, including a 401(k) or a part-time employment. But you won’t likely have to pay taxes on your benefits if you only receive Social Security checks. State taxation of Social Security varies.

Regardless, it’s a wise idea to speak with a financial counselor who can explain the tax implications of various retirement income sources.
Am I Subject to Tax on My Social Security Income?

Is My Social Security Income Taxable?

According to the IRS, the quick way to see if you will pay 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, including tax-exempt interest. This number is known as your combined income (combined income = adjusted gross income (AGI) + nontaxable interest + half of your 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 is $25,000 if you are a single filer, head of household or qualifying widow or widower with a dependent child. The limit for joint filers is $32,000. If you are married filing separately, you will likely have to pay taxes on your Social Security income.

Calculating Your Social Security Income Tax

If your Social Security income is taxable, the amount you pay in tax will depend on your total combined retirement income. However, you will never pay taxes on more than 85% of your Social Security income. If you file 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 in 2021, according to the Social Security Administration.

For the 2021 tax year (which you will file in 2022), 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 was more than $34,000, you will pay taxes on up to 85% of your Social Security benefits.

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