Almost all retirement-aged Americans receive some amount of Social Security income. The average monthly benefit comes in at almost $2,000 ($1,976), and at least 40% of retirees depend on that income to make ends meet.
The exact amount of your benefit can vary wildly depending on how long you’ve paid into the system, as well as the age at which you start taking benefits. Regardless of the precise amount, the reality is that it’s often difficult to get by on Social Security alone. This makes financial planning and budgeting all the more important. It also raises another pertinent question: do you have to pay taxes on Social Security income?
When Is Social Security Taxed?
Whether your Social Security benefits are taxed depends on your total income, not just what you get from the program. The IRS uses a formula called “combined income,” which adds up:
- Your adjusted gross income (AGI)
- Any nontaxable interest (like municipal bonds)
- Half of your Social Security benefits
If that combined income goes above certain thresholds, part of your benefits become taxable. The key word is part—you’ll never owe taxes on 100% of your Social Security income.
Thresholds by Filing Status
Here’s how it breaks down:
- Single, head of household, or qualifying widow(er):
- If your combined income is below $25,000, your benefits aren’t taxed.
- Between $25,000 and $34,000, up to 50% of your benefits may be taxable.
- Above $34,000, up to 85% may be taxable.
- Married filing jointly:
- Below $32,000, none of your benefits are taxed.
- Between $32,000 and $44,000, up to 50% may be taxable.
- Above $44,000, up to 85% may be taxable.
- Married filing separately:
- If you lived with your spouse at any time during the year, up to 85% of your benefits are taxable—there’s no lower threshold.
- If you did not live with your spouse at all during the year, the same thresholds as single filers apply.
These thresholds haven’t changed since the 1980s, which means inflation has pushed more retirees into the taxable range over time.
How State Taxes Treat Social Security
Federal taxes are one thing, but your state may have its own rules. Most states don’t tax Social Security at all, but a handful still do. The details vary: some mirror the federal formula, while others have income-based exemptions.
You can check your state’s department of revenue website or the AARP’s annual tax guide for current rules.
Withholding and Planning
If you expect to owe taxes on your benefits, you can plan ahead instead of getting surprised in April. There are two main ways to do that:
- Voluntary withholding: You can ask the Social Security Administration to withhold federal taxes from your monthly payments by using Form W-4V.
- Quarterly estimated payments: If you have other taxable income, such as self-employment or investment income, paying estimated taxes each quarter can help you avoid underpayment penalties.
Many retirees work with a tax professional to decide which approach makes sense for their mix of income sources.
The Bottom Line
You may have to pay taxes on part of your Social Security income if your total income crosses certain thresholds. For many retirees, that means up to 50%–85% of benefits could be taxable, depending on filing status.
