As taxpayers prepare to file their returns over the next several months, VERIFY is answering your tax season questions.
We’ve already broken down what families should know about the child tax credit in 2023 and provided options for filing your taxes free of charge.
Some VERIFY readers want to know whether they’ll have to pay taxes on certain government benefits they receive. Harry asked if Social Security payments are taxable.
Are Social Security benefits taxable?
Yes, Social Security benefits are taxable for people who meet certain income requirements.
WHAT WE FOUND
All income is considered taxable unless it’s exempted by law, the IRS says. Some of those exemptions include inheritance, gifts, death insurance and life insurance, according to Mark Steber, chief tax information officer at Jackson Hewitt.
When it comes to Social Security, you’ll have to pay federal taxes on a portion of your benefits if your income falls within certain levels. These benefits include monthly retirement, survivor and disability benefits. Supplemental Security Income (SSI) payments are never taxed, the IRS says.
No one who receives Social Security payments pays taxes on their full benefit amount, Steber said. But you’ll have to pay more as your income increases.
Here’s the breakdown of how much of your Social Security benefits will be federally taxed based on your income:
Up to 85% of your benefits are taxable if:
- Half of your Social Security benefits plus all other income is more than $34,000 for individuals.
- Half of your Social Security benefits plus all other income is more than $44,000 for a married couple filing jointly.
Example: If a person received $10,000 in Social Security benefits last year and made $35,000 total, they could pay federal taxes on up to $8,500 of those benefits, in addition to their other income.
50% of your benefits are taxable if:
- Half of your Social Security benefits plus all other income is between $25,000 to $34,000 for individuals.
- Half of your Social Security benefits plus all other income is between $32,000 to $44,000 for a married couple filing jointly.
Example: If a person received $10,000 in Social Security benefits last year and made $30,000 total, they could pay federal taxes on about $5,000 of those benefits, in addition to their other income.
None of your Social Security benefits are taxable if:
Your income falls below the above levels for individuals or couples filing jointly.
The above rules apply to federal income taxes. Twelve states also tax some or all of residents’ Social Security benefits, according to AARP. You can find more information about individual states here.
The IRS has an online tool that can help you determine whether your benefits are taxable.
There are options for paying federal income taxes on your Social Security benefits, AARP says. You can either file quarterly estimated tax returns with the IRS, ask Social Security to withhold federal taxes from your benefit payment, or you could pay the full amount at tax time.