Social Security beneficiaries often wonder how the money they receive from the government each month will affect their taxes. The answer to this question depends on a beneficiary's filing status and their total income for the year.

For tax purposes, Social Security income includes monthly retirement, disability and survivor benefits. This amount can be found on Form SSA-1099 (Social Security Benefit Statement), which is sent to individual beneficiaries each year in January. If you need a replacement form, you can call your local Social Security office or request one online through your my Social Security account beginning February 1, 2017.

The money a person receives in Supplemental Security Income (SSI) is not subject to taxation. For ex-railroad employees, the social security equivalent benefit (SSEB) part of their tier one railroad retirement benefits may be taxable. This amount can be found on a Form RRB-1099 (Payments by the Railroad Retirement Board) which is sent to individual beneficiaries.

Typically, if a person's only source of income for the year was from Social Security or SSEB, then their benefits will not be taxable.

Determining whether a person's benefits can be taxed involves performing some calculations using the numbers reported on the aforementioned forms, the beneficiary's total income for the year and the base amount that applies to their filing status category.

Are Social Security Benefits Taxable?

There is an equation that can tell you whether your Social Security benefits are taxable. The determination is based on what is called your "combined income, which consists of the following:

  • One-half of your benefit amount (box 5 of Form SSA-1099 or RRB-1099)
  • Plus your taxable income (e.g. interest, dividends, wages, pensions)
  • Plus your tax-exempt interest income (box 3 of Form 1099-INT)

Comparing this total to the base amount for the beneficiary's filing status (listed below) will tell you if their Social Security benefits can be taxed. If a beneficiary's combined income is greater than their corresponding base amount, then a portion of their benefits must be included in their taxable income. If their combined income is less than the base amount, all of their Social Security benefits can be excluded from their taxable income.

The current base amounts and tax rates for each filing status are as follows:

  • Individuals with a combined income between $25,000 and $34,000 pay income tax on up to 50 percent of their Social Security income.
  • Those individuals with a combined income over $34,000 must pay income tax on up to 85 percent of their Social Security benefit.
  • Married couples who file jointly and have a combined income between $32,000 and $44,000 owe income tax on up to 50 percent of their benefit.
  • Those couples with a combined income over $44,000 pay taxes on up to 85 percent of their Social Security income.

Social Security benefits are never taxed at 100 percent. A worksheet that can help you calculate the precise amount of Social Security that will be taxed can be found on Form 1040 or 1040A.

Withholding Social Security Taxes in Advance

When it comes to paying taxes on Social Security benefits, taxpayers have two options: pay an estimated amount each quarter, or apply to have federal taxes withheld by filling out a Form W-4V (Voluntary Withholding Request).

There are, of course, special considerations and exceptions to these rules, so it can help to consult IRS Publication 915 (Social Security and Equivalent Railroad Retirement Benefits).