Is Social Security Taxable?

Understanding how your Social Security benefits are taxed can be complex but can be crucial for effective retirement planning. If you have income from retirement account withdrawals or part-time employment, you may owe taxes on your Social Security benefits. However, if Social Security is your sole income source, you’re less likely to owe taxes on it.

Calculating Your Taxable Social Security Income

To determine if your Social Security benefits are taxable, first calculate your combined income by adding half of your Social Security benefits to your adjusted gross income (AGI), plus any nontaxable interest you earned.

You may end up paying taxes on up to 50% of your benefits if:

You’re an individual filer, and your combined income is between $25,000 and $34,000

You’re a joint filer, and your combined income is between $32,000 and $44,000

You may end up paying taxes on up to 85% of your benefits if:

You’re an individual filer, and your combined income exceeds $34,000

You’re a joint filer, and your combined income exceeds $44,000

Filing Social Security Income on Federal Taxes

After calculating the taxable portion of your Social Security benefits, report this on your federal tax return. You’ll find the total benefits amount on Form SSA-1099, and you’ll enter this along with the taxable amount on Form 1040.

For retirees who need to pay federal income taxes, withholding taxes from monthly Social Security benefits is an option. Form W-4V allows you to choose a withholding rate, or you can make estimated quarterly tax payments.

Using Roth IRAs to Limit Social Security Taxes

Roth IRAs can help minimize taxes in retirement since withdrawals from these accounts do not count as part of your combined income for Social Security tax purposes. Contributions to Roth IRAs are made with after-tax dollars, allowing for tax-free withdrawals and no required minimum distributions (RMDs). That could make a Roth IRA a great way to increase your retirement income without increasing your taxes in retirement. Wondering how Social Security fits into your retirement plan? Click here to learn more