Are My Social Security Benefits Taxable?

Social Security card laid on top of Form 1040 tax return of income in retirement

Around this time of year, many people find themselves asking if their Social Security benefits are taxable? For most Americans, Social Security benefits, including Social Security Disability Income and Social Security Supplemental Income (SSI), are not taxable. However, depending on your financial situation, they can be. If you have additional retirement income from a 401k, IRAs, other retirement sources, or a part-time or full-time job, more than likely at least part of your Social Security benefits are taxable. Also, even if all you receive is Social Security, if your benefits are above the threshold, you must file a federal tax return. Depending on which state you live in, you may need to file a state tax return. Keep reading for details on how to determine if your Social Security benefits are taxable, and how the IRS determines how much of your Social Security benefits are taxable.

How to Determine if Your Social Security Benefits are Taxable

The easiest way to determine if your Social Security benefits are taxable is to take into consideration your income level. For individuals earning more than $25,000 or married couples earning more than $32,000, you may owe federal income taxes on your Social Security benefits. This applies, even if, your only income is from Social Security. It does not matter if Social Security benefits are from spousal, survivor, disability, or retirement. If your Social Security benefits are below this threshold, the reverse is true: you do not owe taxes on your Social Security benefits.

Supplemental Security Income (SSI) is never considered taxable income. Also, Social Security dependent or survivor benefits for children are not considered taxable income for their parents or guardians. These benefits are taxable to the child, only if the child earns enough income themselves from either Social Security or other sources to have to file a tax return on their own. For 2018, this means the child would need to earn more than $12,000; this amount increases to $12,200 for tax year 2019. If the child does not earn enough income to file their own tax return, then the Social Security dependent or survivor benefits for the child are not taxable.

If the amount of your Social Security benefits is above the threshold, you need to file a tax return to determine the amount of taxes you owe. For details on how the IRS determines how much of your Social Security benefits above the threshold are taxed keep reading below.

How the IRS Determines How Much of Your Social Security Benefits are Taxable

The IRS determines how much of your Social Security benefits are taxable based on your overall income level. The IRS determines your income level by taking your adjusted gross income and adding your nontaxable interest and half of your Social Security benefits.

  • If your income level is between $25,000 to $34,000 for an individual or $32,000 to $44,000 for a married filing jointly couple, up to fifty percent (50%) of your Social Security benefits are taxable; and
  • If your income level is above $34,000 for an individual or $44,000 for a married filing jointly couple, up to eighty-five percent (85%) of your Social Security benefits are taxable.

Example. If you file married filing jointly and earn $50,000 from your work, $1,200 a month from Social Security for a total of $14,400 annually, and your spouse earns another $1,000 a month from Social Security for a total of $12,000, your income level would be above the $44,000 threshold. This means 85% or $22,440 calculated as follows -- ($14,400 your Social Security benefit + $12,000 your spouse’s Social Security benefit = $26,440) x 85% = $22,440 -- of your Social Security would be taxable in addition to your income from work.

Does Ohio Tax Social Security Benefits?

Ohio does not tax Social Security benefits. One of the many great benefits of living in Ohio is Social Security benefits are fully exempt from Ohio state income taxes. If your only income is from Social Security, regardless of the amount, you do not need to file an Ohio state tax return. If your income level is above the thresholds discussed above, you still will need to file a federal income tax return.

The Bottom Line

Determining the amount of your Social Security benefits that are taxable is not easy. If you earn more than $25,000, if filing your taxes individually, or $32,000, if filing married filing jointly, you must file a federal tax return to determine the amount of your Social Security benefits that are taxable. Supplemental Security Income (SSI) is never taxed. Also, Social Security dependent or survivor benefits for children are only taxable to the child, who receives them. The child will only need to file a tax return, if they are above the required filing threshold -- $12,000 for tax year 2018.

Most people, who receive only Social Security benefits, neither need to file federal nor state tax returns. However, if you are not sure if you are above the filing threshold or how much of your Social Security benefits are taxable, schedule an appointment with the tax professionals at Gudorf Tax Group. They will review how much of your Social Security benefits are taxable, if any, and why.

Categories: Taxable Income

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