Will your Social Security Benefits have tax on them?

The short answer is YES!

And the long answer is maybe NO!

Actually, It depends.

Let’s find out what factors it depends upon and will you have to pay taxes on your Social Security Benefits.

First of all, if you are dependent on just your Social Security Income.

And it is very easy if you are just dependent on social security income which means your only source of income is just social security then you DON’T HAVE TO PAY ANY TAXES ON SOCIAL SECURITY BENEFITS.

Because you need to understand social security benefits are not a big number i.e. in most cases it is just 1500$ per month which is below any taxation limits.

So If you are just dependent on social security as the income then you or your client does not have to pay any taxes.

Now comes the complicated part, i.e. if you are just not dependent on your social security income and you have your 401k planned and maybe a part-time job then you may need to pay taxes on your social security benefits.

Now this is not this simple there are other Complicated scenarios to this and we are going to explain to you each and every scenario just stay with us.

Now, Either you are an individual, widower or a couple living together or separately first complete this formula and find your combined income because that will determine how much you will be taxed on SSB

Combined Income = Half of Social Security Benefit (Annually) + Adjusted Gross Income (Income after deductions or exemptions) + Non-Taxable Interest

Now the first Differentiation is based on whether you are an individual or a married couple because if you are an individual then you have a limit of $25,000 or if you are an individual you have the limit of $32000 to be able to be taxed.

The individual means here Single filer, Qualifying Widow, Widower with dependent

Couple means married but filing separately or together.

Summarizing above points

  1. If you are just dependent on Your social security income for a living then you are not taxed at all on your social security benefits
  2. also, if you are an individual who is making less than $25,000 / per year then you are also not taxed your social security benefits and if you are a couple that and you are making less than $32,000 then you are not taxed on your social security benefits at all.

Individual Taxes

Now If you are an individual who is making between $25,000 to $34,000 as combined income then you will pay taxes on 50% of your social security benefits.

And if you are making more then $34,000 per year then 85% of your social security benefits are taxable.

For example, John Receive social security benefits of $1,500 per month which total to $18,000 per year.

Now, let’s take the three scenarios we discussed as an individual first

  • If John is completely dependent upon the social security benefits for his living then he will not be taxed at all
  • If John is making less than $25,000 per year as combined income then he will also be not taxed on his social security benefits
  • If John is making  $30,000 per year as combined income then he will be taxed 50% on his social security benefit i.e. (50% of 18,000) he will be taxed upon 9000 dollars.
  • If John is making $40,000 per year as a combined income then he will be taxed 85% offer social security benefit which is $15,300.

Couple Taxes

If you are a couple and making between 32,000$ and $44,000 per year then 50% of your social security benefits are taxable and if you are making more than $44,000 then 85% of your social security benefits are taxable.

For example, John and his lovely wife Maghen Receives social security benefits of $1,500 per month individually which total to $36,000 per year.

Now, let’s take the three scenarios we discussed as an individual first

  • If John and his wife is completely dependent upon the social security benefits for his living then he will not be taxed at all
  • If John and Maghen are making less than $32,000 per year as combined income then they will also be not taxed on their social security benefits
  • If John and Maghen are making between $32,000 and $44,000 per year as combined income then they will be taxed 50% on their social security benefit i.e. (50% of 36,000) he will be taxed upon 18,000 dollars.
  • If John and Maghen are making more than $44,000 per year as a combined income then he will be taxed 85% offer social security benefit which is $30,600.

Additional Taxes on Social Security

Now the taxes we have discussed till now come under federal taxes and Some States also have their own taxes on Social security apart from federal taxes so you need to consider that as well.

So if you are living in Minnesota, North Dakota, Vermont, West Virginia then you will be taxed according to the federal rules

If you are living in Colorado, Connecticut, Kansas, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah then you will be taxed partially and you will be given exemptions based on your income and age

If you are living in Alabama, Alaska, Arizona, Arkansas, California, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Nevada, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Virginia, Washington, Wisconsin, Wyoming there is no tax on your social security benefits.

Final Words

We hope that we were able to explain to you whether your social security income is taxable or not.

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