Social Security benefits may be non-taxable or partially taxable, depending on your total income from other sources. Use the “Social Security Benefits Worksheet” in the Instructions for IRS Form 1040 to calculate your taxable amount. Social Security benefits are reported on Form 1040 Line 20 or Form 1040A Line 14.
Social Security is Only Source of Income
If the only income you received during the tax year was your social security or equivalent railroad retirement benefits, your benefits are most likely not taxable and you probably will not have to file a tax return,” according to the IRS, Tax Topics 423.
Taxable Social Security
Social Security benefits are taxed depending on your total income from all sources. Here’s how to calculate how much of your Social Security benefits is taxable.
Provisional income is your total worldwide income, including tax-exempt income, plus half of your Social Security benefits.
The following base amounts are used in figuring your taxable Social Security:
Filing Status Base Additional
Single $25,000 $34,000
Head of Household $25,000 $34,000
Married Filing Jointly $32,000 $44,000
Married Filing Separately $0*
Qualifying Widow(er) $25,000 $34,000
* Married couples who file separate tax returns have two different methods for computing the taxable portion of their Social Security benefits:
(a) For married couples who lived in the same household at any time during the year, their base amount is zero. Up to 85% of their benefits will be subject to tax.
(b) For married couple who lived apart from each other for the entire year, they can use a base amount of $25,000 and the additional income amount of $34,000 for computing the taxable portion of their benefits.
Taxable Social Security Benefits
If your provisional income is below the base amounts for your filing status, then your Social Security benefits are completely non-taxable.
If your provisional income is between the base amount and the additional amount, then half of your Social Security benefits over the base amount are taxable.
If your provisional income is over the additional amount, then $4,500 (or $6,000 if Married Filing Jointly) plus 85% of your Social Security benefits over the additional amount are taxable.
The taxable portion of your Social Security benefits cannot exceed 85% of your total benefits.
To phrase this differently, Social Security benefits below the base amount are not taxed. Half the benefits between the base and additional amounts are taxed. 85% of the benefits above the additional amount are taxed.
The following is further explanation from the Social Security Administration.
Some people have to pay federal income taxes on their Social Security benefits. This usually happens only if you have other substantial income (such as wages, self-employment, interest, dividends and other taxable income that must be reported on your tax return) in addition to your benefits.
No one pays federal income tax on more than 85 percent of his or her Social Security benefits based on Internal Revenue Service (IRS) rules. If you:
Are Social Security Disability Benefits Taxable?
If you are approved for Social Security disability benefits, your benefits may be taxable. You may find yourself with tax obligations if you have other sources of income besides your disability payment, or if your spouse earns a substantial income.
If you file a federal tax return as an “individual” and your combined income* is between $25,000 and $34,000, you may have to pay income tax on 50 percent of your Social Security benefits. If your combined income is above $34,000, up to 85 percent of your Social Security benefits is subject to income tax.
If you are married and file a joint return, you may have to pay taxes on 50 percent of your benefits if you and your spouse have a combined income that is between $32,000 and $44,000. If your combined income is more than $44,000, up to 85 percent of your Social Security benefits is subject to income tax.
IRS TIPS REGARDING SOCIAL SECURITY
The following information is provided by the IRS and is included here for additional information:
Are Your Social Security Benefits Taxable?
The Social Security benefits you received in 2010 may be taxable. You should receive a Form SSA1099 which will show the total amount of your benefits. The information provided on this statement along with the following seven facts from the IRS will help you determine whether or not your benefits are taxable.
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