Some taxpayers have to pay federal income taxes on their Social Security benefits. This usually happens if there is other substantial income (such as wages, self-employment income, interest, dividends, or other taxable income that must be reported) in addition to Social Security benefits.
Many taxpayers incorrectly believe that their Social Security is not taxable because they have reached a certain age. There is no federal Social Security exclusion for age. To determine if Social Security benefits are taxable provisional income must be calculated.
What Is Provisional Income?
For purposes of Social Security, provisional income is 1/2 of a taxpayers social security, plus income from all other sources.
If provisional income is in excess of the applicable base amount for the taxpayer, then their Social Security will be taxable. It is important to note that if using the MFS status, and the taxpayer lived with their spouse during the tax year, 85% of their benefits are taxed and the base amounts do not apply.
The Base Amounts Are:
$25,000: For single, head of household, and qualifying widower, marry filing separately taxpayers who lived apart from their spouse all year
$32,000: For Married Filing Jointly taxpayers
How Is Social Security Taxed?
Social Security benefits are never 100% taxable.
- Up to 50% of benefits can be taxable if income is $25,000 to $34,000 for an (individual) or $32,000 to $44,000 (MFJ)
- Up to 85% benefits can be taxable if income is $34,000 (individual) or $44,000 (MFJ)
Sample SSA-1099 Calculation:
For example, if you have a taxpayer that is 65, single, and has the following income:
1. Begin by calculating provisional income.
$10,000 (1099-R) + $2,000 (W-2) + $20 (1099-INT) + $8,000 (half of SSA-1099)=$20,020
2. Compare provisional income ($20,020) to the base amount ($25,000 single).
Since the provisional income is below the base amount, none of the social security is taxable.
How Do I View the Taxable Portion of Social Security Benefits on a Tax Return?
1. Navigate to Form 1040 using the Attached Forms Tree.
2. The taxable portion of Social Security benefits is displayed on Line 6b
You can also view the taxable portion of Social Security benefits on the Tax Summary Page.