Are Social Security Survivors' Benefits Taxable?
Social Security survivors' benefits are available to spouses and children and sometimes to dependent parents over age 62, providing financial stability when a worker dies. Many of the survivors' benefit rules are the same as Social Security retirement regulations. Taxation of survivors' benefits by the Internal Revenue Service (IRS) is based on combined income, the same as retirement benefits.
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Combined Income
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Combined income calculations determine taxation of retirement and survivors' benefits for Social Security. Use the adjusted gross income figure from IRS Form 1040 and add nontaxable income plus 50 percent of the Social Security benefits received for the year. This is the combined income figure that determines taxation of benefits. The IRS provides a worksheet on Form 1040 to make this calculation easier; Publication 925 from the IRS also contains a worksheet.
Form SSA-1099
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The Social Security Administration provides Form SSA-1099 with the correct amounts and payee for income tax purposes. The person named on the 1099 is the person who owes the tax, even if the survivors' benefits are for children of the deceased. Wait until the SSA-1099 arrives to make calculations, as the accurate figures you need are on the form.
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Calculations
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No taxation of Social Security benefits occurs with a combined income calculation below $25,000 for single filers or $32,000 for married persons filing jointly, as of October 2010. Combined income above the threshold triggers taxation of Social Security benefits at two levels: 50 percent and 85 percent. Combined income between $25,000 and $34,000 for single filers, and $32,000 and $44,000 for married filers, triggers taxation of up to 50 percent of Social Security benefits. Up to 85 percent of Social Security benefits are taxable with a combined income calculation above $34,000 for single filers and $44,000 for married filers.
Lump-Sum Benefit
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One kind of survivors' benefit is not taxed by the IRS. Social Security pays a lump-sum benefit to the next-of-kin survivor upon the death of a worker. The lump-sum amount is $255 as of October 2010 and isn't taxable, according to IRS Publication 554.
Voluntary Withholding
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Voluntary withholding is available to Social Security recipients who may owe income taxes to the IRS. You may choose to file a W-4V for voluntary withholding of a percentage of your Social Security survivors' benefits. You choose the percentage: 7 percent, 10 percent, 15 percent or 25 percent. Complete the form and deliver it to your nearest Social Security office to start voluntary withholding from your survivors' benefit check each month.
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References
- IRS.gov: Publication 554: Taxable and Non-Taxable Income
- Social Security Online: Widows, Widowers & Other Survivors: Qualify and Apply
- Social Security Online: Publication 05-10069: How Work Affects Your Benefits
- IRS.gov: Survivors' Benefits
- Social Security Online: Requirements for Survivor Benefits
- Social Security Online: Social Security Handbook Section 125: Entitlement to Retirement, Survivors and Disability Insurance Benefits
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