Kelly Phillips Erb
March 17, 2020
In February of 2020, more than 69 million people collected a check for Social Security, Supplemental Security Income (SSI), or both. The majority of those beneficiaries (nearly 50 million) were over the age of 65. Many of those seniors will receive those benefits tax-free, while others may be required to pay tax on their benefits. Are your Social Security benefits taxable? Here’s what you need to know.
Social Security benefits are designed to supplement income in retirement (and provide specific benefits for the disabled, spouses, and dependents). Typically, benefits work out to about 40% of pre-retirement income. However, the actual amount received can vary depending on your lifetime earnings. As of February 2020, the average monthly check for retired workers, excluding spouses and dependents, totaled $1,507.01, or $18,084.12 per year.
Once you reach retirement age, whether your Social Security benefits are taxable depends on your filing status and how much other income you receive. To determine if that applies to you, you’ll need your Form SSA-1099, Social Security Benefit Statement. That’s the tax form that reports your total Social Security benefits. If you don’t have it, here’s how to get it.
You’ll also need your Forms W-2, 1099, K-1, or other supporting documents related to your income for the year. You should have them handy since most were due to you by January 31.
Use the numbers on those forms to see which applies to you:
- If your only source of income is your Social Security check, your benefits are generally not taxable. You may not even need to file a return.
- If you received income from other sources, your benefits would not be taxed unless your modified adjusted gross income (MAGI) is more than the base amount for your filing status.
The quick and dirty version of the MAGI formula is to add one-half of the total Social Security benefits you received (that’s what is reported on Form SSA-1099) to all your other income, including any tax-exempt interest and other exclusions from income. Compare that total to the base amount for your filing status. If the total is more than the base amount for your filing status, some of your benefits may be taxable.
Or, put another way, you will not be taxed on your benefits if: your adjusted gross income PLUS nontaxable interest AND ½ of your Social Security benefits is LESS THAN the base amount.
The base amounts are:
- $32,000 for married taxpayers filing jointly;
- $25,000 for taxpayers filing as single, head of household (HOH), qualifying widow/widower with a dependent child, or married filing separately who did not live with their spouses at any time during the year; and
- $0 for married persons filing separately who lived together during the year.
Here’s a quick example. Let’s say you’re a single taxpayer with Social Security benefits of $15,600. Let’s say you have $1,000 in dividends, $1,000 in taxable interest and $6,000 in other income. Your MAGI is: $15,800 = $7,800 (1/2 of SS benefits) + $8,000 (dividends, taxable interest and tax-exempt interest). Since that total is less than $25,000 (the base amount for your filing status), your Social Security benefits would not be taxable.
Here’s another example: Let’s say you’re a single taxpayer with Social Security benefits of $20,000. Let’s say you have $10,000 in dividends, $10,000 in taxable interest and $12,000 in other income. Your MAGI is: $42,000 = $10,000 (1/2 of SS benefits) + $32,000 (dividends, taxable interest and tax-exempt interest). Since that total is more than $25,000 (the base amount for your filing status), part of your Social Security benefits would be taxable.
If part of your Social Security benefits is taxable, the taxable amount depends on the total amount of your benefits and your other income. As a rule, the higher your total income, the higher the percentage of your Social Security benefits subject to tax.
If you owe tax on your Social Security benefits, typically up to 50% of your benefits will be taxable. However, up to 85% of your benefits can be taxable if your MAGI is more than $34,000 ($44,000 if you are married filing jointly) or if you are married filing separately and lived with your spouse at any time during 2019. No one pays federal income tax on more than 85% of their Social Security benefits.
You can figure the precise amount using Worksheet 1, found in Pub 915 (downloads as a PDF).
When calculating whether benefits are taxable, only include those benefits that are legally yours. If you and your child receive benefits, but the check for your child is made out in your name, use only your part of the benefits to see whether you might owe tax. The benefits paid to the child must be added to your child’s other income to see whether any of those benefits are taxable.
If your benefits are taxable, here’s how to report them:
- You must file using Form 1040 or the new Form 1040-SR, U.S. Tax Return for Seniors . It’s designed for older taxpayers with bigger print and increased attention to the additional standard deduction for those 65 or older.
- Report your net benefits (the total amount from box 5 of all Forms SSA-1099 and Forms RRB-1099) on line 5a and the taxable part on line 5b of Form 1040 or Form 1040-SR.
- If you are married filing separately, and you lived apart from your spouse for all of 2019, also enter “D” to the right of the word “benefits” on line 5a.
If none of your Social Security benefits are taxable, you may still need to file a tax return, depending on your circumstances. If that’s the case, here’s how to report your nontaxable benefits:
- Again, you must file using Form 1040 or Form 1040-SR.
- Report your net benefits (the total amount from box 5 of all your Forms SSA-1099 and Forms RRB-1099) on line 5a of Form 1040 or Form 1040-SR. Next, enter 0 on line 5b.
- If you are married filing separately, and you lived apart from your spouse for all of 2010, also enter “D” to the right of the word “benefits” on line 5a.
If you owe tax year after year because of your other income, you may want to make adjustments. You can make estimated payments or adjust your withholding. You can change your withholding by completing a form W-4V, Voluntary Withholding Request (2020 version downloads as PDF), and returning it to your local Social Security office by mail or in-person. When you complete the form, you will need to select the percentage of the monthly benefit amount you want to be withheld. You can withhold 7%, 10%, 12%, or 22% of your monthly benefit for taxes: flat dollar amounts are not accepted. If you have questions about your tax liability or want to request a Form W-4V, you can also call the IRS at 1.800.829.3676. (If you are deaf or hard of hearing, call the IRS TTY number, 1.800.829.4059.)
For more information, consult with your tax professional and check out IRS Pub 915 (downloads as a pdf).