What Is the Income Tax Liability for a Single Person on Social Security?

Social Security affords basic protection for retirement, but does not meet 100 percent of the income needs of the retiree. Social Security provides about 40 percent of preretirement income and about 50 percent of what the retiree requires. Most retirees must find other sources to sustain them in retirement years. Social Security and the Internal Revenue Service work together to provide basic retirement benefits without taxation, but extra income may cause taxation of Social Security benefits.

History

Recent changes in Social Security and IRS regulations affect retirees. Taxation by the IRS of Social Security retirement income first occurred in 1983 as proposed by the "Greenspan Commission" to keep Social Security solvent. A change in 1993 increased the income tax for the higher-earning retirees. In 2000, President Clinton signed a repeal of the retirement earnings test that originally provided penalties for workers over full retirement age who made income in addition to Social Security.

Considerations

With the regulations in place in 2010, the single person on Social Security retirement may have no federal income tax liability. IRS Publication 17 is the guide to most of the regulations you need. The IRS bases filing regulations on age, income and filing status. If you are under age 65 and single, you can make $9,350 in 2009 and may not need to file an income tax return. Retirees over 65 and single can make $10,750 in 2009 in gross income without needing to file an income tax return under most situations. You may want to file a federal income tax return if you are entitled to a refund, rebate or similar benefit.

Gross Income

Gross income is income in the form of money, goods, property and services that is not exempt from taxation by the IRS. Gross income can also include foreign sources of income and the profit from the sale of a home. Gross income is the starting point for all things taxable with the IRS.

Combined Income

Combined income is a special calculation used by the IRS to determine whether Social Security benefits are taxable. This is gross income plus nontaxable interest and 50 percent of your Social Security benefits. If you are single and this figure is in excess of $25,000, up to 50 percent of your Social Security benefits are taxable. If this figure is below $25,000, no federal tax applies to your Social Security benefits.

Federal Taxation

If you claim yourself as a dependent, the IRS exemption is $3,650 for the 2010 tax year. The standard deduction is $5,700 for 2010. The minimum you'll be able to subtract from your personal income prior to taxes is the total of these two figures or $9,350. The IRS calculates any tax liability for a single person receiving Social Security on income in excess of this figure.

References

• IRS.gov: Publication 17: Your Federal Income Tax
• IRS.gov: Inflation Having Little Effect on Tax Rates and Benefits in 2010 - October 2009
• Social Security Online: SSA History: History of SSA 1993-2000
• Social Security Online: Benefit Calculators: More Charts and Calculators
• Social Security Online: Publication 05-10035: Retirement Benefits