So, you are receiving Social Security benefits, however, you are not sure if this income is subject to federal income taxes. According to the Social Security office, paying taxes on Social Security benefits only happens if there is other substantial income reported on the tax return, such as wages, self-employment, interest, dividends, or other taxable income.
A single individual or head of household who makes an income of less than $25,000 will not be required to pay tax on their Social Security benefits. However, if their income is between $25,000 and $34,000, they may pay income tax on up to 50 percent of their benefits. If the income is more than $34,000 then 85 percent of the benefits received will be subject to income tax.
For married couples filing jointly with a combined income of less than $32,000, they will not be required to pay income taxes on their benefits. If their income is between $32,000 and $44,000, they may be required to pay income tax on 50 percent of their benefits. When the combined income is more than $44,000, the couple will pay income tax on up to 85 percent of their benefits. If married filing separately and living apart all year, they follow the single/HOH rules. However, if they lived together for even part of the year then the base is zero and they will have to pay tax on 85 percent of their benefits.
The combined income mentioned above is calculated as the adjusted gross income plus nontaxable interest plus half of the Social Security benefits. Social Security benefits include retirement benefits, spousal benefits, survivor benefits, and Social Security disability insurance, however, supplemental security income is never taxable regardless of income. At the beginning of each year, you should receive a Social Security Benefit Statement, also referred to as a Form SSA-1099. This will state the amount of benefits received in the prior year. This form will be used to complete your federal income tax return and determine if the benefits are subject to tax.
If you have determined that you must pay tax on your benefits you can do so in a few ways. There is the choice of making quarterly estimated tax payments to the IRS or contact the Social Security office to withhold federal tax from your benefits. We understand when deciding what is taxable and nontaxable it can get confusing. Here at ADKF, P.C., we have dedicated tax specialists that can help you decipher whether you owe tax on certain income and ensure you are getting every deduction possible. If you are receiving Social Security benefits and are unsure whether you should be paying income tax on those benefits, please reach out to ADKF, PC. where we are with you all the way!