Tax on Social Security Benefits

By | December 13, 2013

What kind of federal and state tax is there on social security benefits?

Your income, which in this case is defined as your Adjusted Gross Income, plus tax-free interest, plus half of your Social Security benefits, will be the biggest factor in deciding how your social security benefits will be taxed. For example,  if your income (AGI) is less than $25,000 on a single person filing a tax return or $32,000 on a joint return (married couple tax return), your Social Security benefits are tax-free.


Tax on Social Security Benefits

After this point, the taxation of social security benefits begins. This means that Individuals with incomes between $25,000 and $34,000 pay tax on up to 50 %t of their  social security benefits. The IRS provides a chart to figure out the exact amount. Individuals with incomes over $34,000 pay income tax on up to 85 percent of their benefits.


Social Security Tax Filing Jointly

The taxation of this important retirement source of income is different when you are married. Married couples filing a joint tax return with incomes ranging between $32,000 and $44,000 pay tax on up to 50 percent of their Social Security retirement benefits. When the amount of income increases, so does the amount of taxation. Married couples with incomes over $44,000 pay taxes on up to 85 percent of their benefits. Above this point and you will be paying more tax on social security benefits.

You can elect to have taxes withheld from your social security benefits. This might help prevent a surprise when taxes are due in April. Basically, when you withhold, taxes will be sent to the IRS directly. This is very similar to what happens with a paycheck when you are employed by a company. The Social Security Administration will be glad to withhold federal income taxes from your retirement benefits if doing so lets you avoid making quarterly estimated tax payments.


Social Security Tax Form

A taxpayer can file a Form W-4V with the IRS. State tax laws on withholding are different and ome states exempt some or all of your Social Security benefits from income taxes.

You can download the form, or call the IRS toll-free number1-800-829-3676 and ask for Form W-4V, Voluntary Withholding Request. (If you are deaf or hard of hearing, call the IRS TTY number, 1-800-829-4059.)

When you complete the form, you will need to select the percentage of your monthly benefit amount you want withheld. You can have 7%, 10%, 15% or 25% of your monthly benefit withheld for taxes. If you need more information about tax withholding, read IRSPublication 554, Tax Guide for Seniors, and Publication 915,Social Security and Equivalent Railroad Retirement Benefits.