By Rusty Gloor, National Social Security Advisor at the AMAC Foundation, the non-profit arm of the Association of Mature American Citizens
Dear Rusty: I do not recall the rules on my income tax obligation for Social Security benefits. Can you please explain these rules to me? Signed: Senior Taxpayer
Dear Senior Taxpayer: I’ll be happy to review the rules about income tax on Social Security benefits for you. If your combined income from all sources is low enough, your Social Security benefits aren’t subject to being taxed by the IRS. But some of your Social Security benefits will become taxable if your combined income from all sources exceeds certain thresholds, and the thresholds are dependent on your tax filing status (single or married).
If you file your income tax as “married-filing jointly” and your combined income from all sources (both taxable and non-taxable income) is less than $32,000, then your Social Security benefits aren’t taxable. But if your combined income as a married couple is between $32,001 and $44,000, then half of the SS benefits you received during the tax year becomes part of your taxable income.
And if your combined income as a married couple exceeds $44,000 then up to 85% of the SS benefits you received during the tax year becomes part of your taxable income. Those SS benefits will simply be included as part of your taxable income and taxed at whatever your normal IRS tax rate is.
If you file your income tax as a “single” the thresholds at which Social Security benefits become taxable are different. Single filers with a combined income of $25,000 or less pay no income tax on their benefits. But single filers with combined income between $25,001 and $34,000 will have half of their SS benefits received during the tax year become taxable, and single filers whose combined income exceeds $34,000 will see up to 85% of their Social Security benefits become taxable.
These single filer thresholds apply also to those filing as Single Head of Household or Qualifying Widow(er), and to those filing as “married-filing separately” if they lived apart for the entire tax year. But the threshold is zero dollars for married couples who file separately but lived together at any time during the tax year.
To clarify what “combined income” is – the IRS uses something called your Modified Adjusted Gross Income, or “MAGI,” to determine if your Social Security benefits should be taxed. Your MAGI is your normal Adjusted Gross Income (AGI) from your tax return, plus any non-taxable income you may have had, plus 50% of the Social Security benefits you received during the tax year.
If your MAGI is over the thresholds described above, a portion of the SS benefits you received during the tax year will be included in your taxable income. If it is not, you pay no income tax on your benefits.
To be sure you’re aware, when you file as “married/jointly” income from both partners counts when determining your MAGI for income tax purposes.
This article is intended for information purposes only and does not represent legal or financial guidance. It presents the opinions and interpretations of the AMAC Foundation’s staff, trained and accredited by the National Social Security Association (NSSA). NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity. To submit a question, visit our website (amacfoundation.org/programs/social-security-advisory) or email us at ssadvisor@amacfoundation.