The Social Security Administration (SSA) reports that 68 million individuals receive monthly Social Security benefits, including retirement, survivor, and disability benefits. You may be surprised to learn that these benefits may in fact be subject to taxes in many circumstances. This includes paying federal income tax on Social Security benefits and, in some cases, state income tax, too. (Note, however, that another type of government benefit, Supplemental Security Income (SSI), is not taxable.)
Older adults collect three-quarters of all Social Security benefits, with nine in 10 retirement-aged adults receiving benefits. As of the end of 2024, the average monthly benefit for a retired worker was $1,905, with a yearly average payout of $22,860.
Still, Social Security benefits only account for 30 percent of income for adults 65 and older. This suggests that many retired people have other income sources. For example, they could have income from an annuity, rental property, pension, or job. Spouses of retired people may work and contribute to household income as well.
Federal Taxes on Social Security Benefits
When a household has taxable income in addition to any Social Security benefits, a portion of their benefit amount can be subject to federal income tax. The SSA projected that 56 percent of beneficiary families will owe federal income tax on part of their Social Security benefits from 2015 to 2050.
Household Income Determines When the IRS Taxes Benefits
If household income is high enough, the Internal Revenue Service (IRS) taxes Social Security benefits. Taxes apply when one-half of a household’s Social Security benefits plus their other household income exceeds a certain threshold for the household’s filing status. So, the IRS taxes Social Security benefits when a household has additional income that places it above this base amount.
Unmarried Individuals
The base amount for unmarried individuals, including those who are single, divorced, or widowed, is $25,000. If someone’s only source of income was Social Security, their total income would likely fall under this threshold. However, an individual filing singly who has additional taxable income that puts them over the base amount will have to pay taxes on part of their Social Security benefits.
Married People
For married people filing jointly, the base amount is $32,000. Those who file a joint return must combine their incomes and Social Security benefits to determine the taxable portion.
Suppose one spouse has retired and the other continues working. Their joint income would reflect one-half of the retired spouse’s Social Security benefits plus the working spouse’s income from employment.
Separated Couples
People who are separated and are in the process of ending their marriage can file taxes on their own. The base amount for married people who have been living apart for the entire tax year is also $25,000. In this way, the IRS treats separated people as single filers.
However, individuals who lived with their spouse at any time during the tax year must pay taxes on their Social Security benefits even if they file their taxes separately. For these individuals, the base amount is $0.
How Much of Social Security Is Taxable?
When a household’s income exceeds the base amount, the IRS taxes between 50 percent and 85 percent of Social Security benefits. The amount taxed depends on your filing status and income.
For those whose income moderately exceeds the Social Security threshold, the IRS taxes up to 50 percent of their benefits. This applies to the following groups:
- People filing as single, head of household, or as a qualifying widow or widower with income between $25,000 and $34,000
- Married individuals filing separately and living apart, each with between $25,000 and $34,000
- Married people filing jointly with between $32,000 and $44,000
Up to 85 percent of benefits are taxed when income exceeds those amounts.
Note that if you are living overseas and collecting Social Security benefits, the tax thresholds are the same. However, keep in mind that some foreign countries may tax these benefits as well.
State Taxes on Social Security Income
Most states do not tax Social Security benefits. However, the following 10 states impose taxes as of 2024, per Yahoo:
- Colorado
- Connecticut
- Kansas
- Minnesota
- Montana
- New Mexico
- Rhode Island
- Utah
- Vermont
- West Virginia
Whether one of these states levies a tax on Social Security benefits may depend in part on the filer’s adjusted gross income, marital status, and age. Again, those living in states that are taxing benefits may need to pay federal and state taxes on their Social Security benefits.
Plan in Advance
In the years ahead of your retirement, take time to think through what your sources of income will be. Consider questions like whether you plan to hold a job after you retire. Will you delay claiming your Social Security benefits until your full retirement age? Your choices are likely to have tax consequences as well as an impact on how much you’ll be receiving in Social Security benefits.
Qualified financial advisors or elder law attorneys can assist you with tax planning, including Social Security benefits taxes. Find an elder law attorney near you today.
Additional Resources
For further reading on Social security benefits, check out the following articles:
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