If you receive Social Security retirement or disability benefits, you may have to pay income tax on that money, depending on several factors, including your filing status and total income. The Internal Revenue Service has you calculate your earnings from all sources, including Social Security benefits, and then determine if a percentage of those benefits is taxable.
When preparing your annual tax return, you must declare income from your job, from savings accounts, from stock dividends, and from sources such as alimony or a business that you operate as a sole proprietor. The IRS requires you to also list the amount of Social Security benefits you've received, and any taxable amount of these benefits, on Line 20a and Line 20b, respectively, of Form 1040. You have to do a separate calculation to figure the taxable amount; the IRS provides a worksheet in the booklet it sends with your forms.
Figuring Combined Income
To figure the amount of Social Security that should be included in your adjusted gross income, you must first add together your gross income from other sources, tax-free interest, and one-half of the Social Security benefits you received during the year. The number that results is known as your "combined income." The Social Security Administration issues you a 1099-SSA every year to show the amount of Social Security benefits you received.
Filing Status and Tax Rates
If you're filing as a single taxpayer, and your combined income is between $25,000 and $34,000, then you add 50 percent of your Social Security benefits to your adjusted gross income. If your combined income is higher than $34,000, then you add 85 percent of your Social Security benefits to adjusted gross income. You don't add any Social Security benefits to adjusted gross income if combined income is less than $25,000.
If your filing status is "married, joint," then you add together combined income from both spouses, including Social Security income that both receive. If the result is between $32,000 and $44,000, then you add 50 percent of your Social Security benefits for both spouses to adjusted gross income on the return. If the combined income rises above $44,000, then you add 85 percent to adjusted gross income. A combined income of less $32,000 exempts you from adding any Social Security benefits to adjusted gross income.
Married, Filing Separately
If your filing status is "married, separate," but you lived with your spouse at any time during the tax year, then the IRS requires that you pay tax on 85 percent of the Social Security benefits you received. If you did not live with your spouse at any time during the year, then the tax rates on your Social Security match those of someone who filed as a single.
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