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Quick Bites
- You may owe income taxes on your Social Security benefits, depending on how much other income you have in retirement.
- Up to 85% of your Social Security benefits could be taxable.
- A child collecting survivors benefits is unlikely to have to pay taxes on that income.
- The tax-free income you collect with a Roth IRA could help with tax planning.
Whenever you sit down to do your taxes, you see why so many companies are in the tax-filing business: It’s complicated. And that doesn’t necessarily change when you retire and start collecting Social Security benefits. So as you plan for how much income you’ll have in retirement, it’s important to understand when your Social Security is taxable.
Here’s what you need to know about Social Security benefits and taxes, including when—and how—federal income taxes may come into play.
Inside this article
Is Social Security taxable?
In short: yes, for some. The answer to whether or not your Social Security is taxable depends on how much else you make, say from a pension, part-time work or retirement account withdrawals.
If what’s called your “combined income” (sometimes called “provisional income”) exceeds certain income thresholds, you will owe taxes on a portion of your Social Security benefits. Your combined income is half of your Social Security benefits, plus all of your other income, including tax-exempt interest.
Depending on your tax filing status, if your combined income exceeds the following amounts, it may trigger income taxes on Social Security benefits[1]:
| Combined income level | Filing status |
|---|---|
| $32,000 or more | Married, filing jointly |
| $25,000 or more | Single, head of household, qualifying widow(er); or married filing separately and lived apart for the entire year |
| All combined income is taxed | Married, filing separately and lived with your spouse at any point during the tax year |
Because these income thresholds don’t go up every year and wages do, the Social Security Administration projects that through 2050 an average of 56% of Social Security recipients will owe federal income taxes on a portion of their benefits every year.[2]
How much of your Social Security income can be taxed?
Once your combined income triggers income taxes on your Social Security, either up to 50% or 85% of your benefits are taxable. Which of those caps applies to you depends on your overall income and your tax filing status.[3]
| Filing status | Combined income | Taxable percentage of benefits |
|---|---|---|
| Individual | $25,000 to $34,000 | Up to 50% |
| Individual | More than $34,000 | Up to 85% |
| Joint return | $32,000 to $44,000 | Up to 50% |
| Joint return | More than $44,000 | Up to 85% |
Let’s say you’re a single filer with a combined income of $35,000 and you receive $15,000 in Social Security per year. Up to $12,750 of those benefits would be taxable.
Another thing to keep in mind is that triggering income taxes on your Social Security benefits can push up your marginal tax rate, which is the tax rate you pay on each additional dollar you earn.
“The biggest point of complexity with tax planning and Social Security benefits is that your marginal tax rate often increases significantly once you begin receiving Social Security,” says Mike Piper, a CPA based in Saint Louis and author of Taxes Made Simple. “In fact, your marginal tax rate is often much higher than just the tax bracket that you’re in.”
Piper offers this example: Let’s say you’re in the 12% bracket. Because each additional dollar of income above the allowed combined income amount is both increasing your taxable income and causing some of your Social Security benefits to be taxable, you could have a marginal tax rate of 22.2%. So you’d be paying more for those extra dollars than you otherwise would.
What about survivors benefits for kids?
In certain circumstances, those benefits could be subject to taxes as well. However, because children don’t generally earn a lot of money, it’s unlikely that would happen. Assuming a child isn’t married, for example, they would need a combined income of more than $25,000 to have those benefits subject to taxes.[1]
3 tips to maximize your retirement benefits
To get the most from your Social Security, consider taking these steps.
Delay Claiming
For every year you put off collecting Social Security until age 70, your benefit increases (and the fewer years you’ll collect). The system was created so that it would be what’s called “actuarially neutral” for a single person, says Piper.
“So filing early would be about as good as filing late,” he says. “However, life expectancies have increased, which makes filing later better on average.”
Plan as a Couple
If you’re married, it’s important to calculate benefits based on each of your earnings history and understand how your Social Security income might change should the spouse who is claiming Social Security pass away.
“It's an especially good deal for the higher earner to wait to collect benefits, because doing so increases the amount the household receives per month as long as either spouse is still alive,” says Piper.
Fund a Roth IRA
Because withdrawals from a Roth IRA are tax-free, being able to collect income from a Roth can help you manage your tax bill in retirement. Your contributions are with post-tax dollars, so funding a Roth during your working years may make sense if you expect your tax rate to be higher in retirement. You can also convert a traditional IRA to a Roth, and it may be advantageous to do that after you retire but before you have begun collecting Social Security. That way, you’d have a source of after-tax income, which could increase your take-home amount.