Are Social Security Retirement Benefits Taxable Income?

Social Security retirement benefits touch the lives of most Americans, directly or indirectly. Workers pay Social Security taxes into the program over a lifetime of work, and in return receive Social Security benefits upon retirement. Some retirement benefits recipients pay taxes on Social Security benefits, and some do not. About one-third of Social Security retirement recipients pay income taxes on retirement benefits, according to the Social Security Administration.

History

Congress did not provide for taxation of Social Security at its start in 1935. By 1983, reforms were necessary to provide future workers with retirement benefits. One change made in 1983 included taxation of Social Security benefits for the higher wage earners, with no effect on the Social Security recipient whose Social Security benefits are his sole income. Additional taxation of Social Security benefits added in 1993 increased taxation of benefits on the highest earners.

Effects

There is no taxation on Social Security benefits if Social Security is the sole income of the taxpayer. Social Security retirees can make $25,000 individually or $32,000 joint combined income without taxation. Combined income calculations are for determining taxation of Social Security benefits and are not the same as adjusted gross income on the Internal Revenue Service Form 1040.

Calculations

Combined income calculations use the adjusted gross income figure from IRS Form 1040 and add nontaxable interest and one-half of Social Security benefits for the year. The total is the combined income for determining taxation of Social Security benefits.

Taxation

Retirees whose combined income figures are between $25,000 and $34,000 and who file income tax returns individually see up to 50 percent of Social Security benefits taxed. With combined income over $34,000 for individual filers, taxation may be up to 85 percent of Social Security benefits. Filing jointly produces similar results. Taxation of up to 50 percent of Social Security benefits results with a combined income of $32,000 to $44,000 for married filing jointly status on Form 1040. Over $44,000 in combined income in this status triggers up to 85 percent taxation of Social Security benefits.

Result

If you have income other than Social Security retirement benefits, you may pay taxes on your benefits received in years that your combined income exceeds $25,000 as an individual or $32,000 as a married taxpayer. The highest earners see taxation of up to 85 percent of Social Security retirement benefits. Highest earners are those whose combined income is in excess of $32,000 as individuals or $44,000 married filing jointly.

References

• Social Security Online: Publication 05-10035 - Retirement Benefits
• United States History: The Social Security Act
• Internal Revenue Service: Publication 554 - Tax Guide for Seniors

Resources

• Internal Revenue Service: Publication 915 - Social Security and Railroad Retirement Benefits