Social Security comes from the government, so it might seem weird for Uncle Sam to put his hand out and demand a portion of your benefits back — in the form of taxes.
But that happens.
Generally, if Social Security is your only income, your benefits are not taxable, and you probably do not need to file a federal income tax return. But there are times when the Internal Revenue Service might indeed want a piece of your Social Security, depending on your total income and marital status.
Avoid tax surprises that might force you to dip into your retirement savings.
How to know if you owe tax
Retirees should receive Form SSA-1099 from the Social Security Administration by the end of January or in early February.
The form will show your total benefits, including monthly survivor and disability benefits, but not supplemental security income payments, which are not taxable.
If you collect other income in addition to Social Security, you could owe taxes on at least a portion of your government benefits. For a quick computation of your potential tax liability, add one-half of your Social Security benefits to all your other income.
In this calculation, you must also take into account any tax-exempt interest you earned, as well as exclusions from income such as savings bond interest, work-provided adoption benefits or foreign-earned income.
If this amount is greater than the base amount for your filing status, a part of your benefits will be taxable.
Figuring your tax bill
Base amounts for figuring possible tax liability on benefits are:
- $25,000 for single, head of household, or qualifying widow or widower with a dependent child.
- $25,000 for married individuals filing separately and who did not live with their spouses at any time during the tax year.
- $32,000 for married couples filing jointly.
- $0 for married persons filing separately who lived together at any time during the tax year.
Generally, up to half of your benefits will be taxed if you exceed the base amounts. However, up to 85 percent of your benefits could be taxed if you are a single filer and the total of all your other income plus half of your annual Social Security payments exceeds $34,000, or $44,000 if you are married and file jointly.
You’ll need to complete the work sheet found in your Form 1040 or 1040A instruction book, or in your tax software package, to find out the exact amount.
If you’re researching all of this before you start taking Social Security benefits, use our calculator to see you how much you’re likely to receive.
Paying throughout the year
If your government pension money is taxable, you can avoid estimated tax payments and minimize your tax bill next year by having federal income tax withheld from your benefits.
Simply complete Form W-4V, Voluntary Withholding Request, and file it with the Social Security Administration. You can choose to have 7 percent, 10 percent, 15 percent or 25 percent of your total benefit payment withheld.
If you subsequently decide you don’t want the taxes withheld, you can file another W-4V to stop the withholding.
Additional information on the taxability of Social Security benefits is in IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits.