Is Social Security Taxable Income? What You Need To Know

by | Mar 28, 2023

With the unpredictable nature of our current economy, concerns over retirement income and Social Security have caused more people to ask: is Social Security taxable income? The answer might surprise you.

While it depends on various factors like your filing status, other sources of income, and even where you live, there are some important details about this tax benefit that all taxpayers should know.

In this blog post, we’ll discuss the basics of taxing Social Security benefits — so you can properly plan for what’s owed when taxes come due each year.

How The IRS Taxes Social Security

Contrary to popular misconception, you are not exempt from taxes when you reach a certain age. Your Social Security benefits remain taxable over your lifetime, and the amount of taxes you may be liable for is contingent upon your overall income for the current year.

Up to 85% of your Social Security benefits may be subject to taxes at your ordinary income tax rate, depending on the type and amount of other taxable income you receive.

This could include wages from an employer, self-employment earnings, or investment returns from stocks or bonds. Yet it is important to note that 44% of people will only owe income taxes on their Social Security benefits due to a lack of other sources of taxable income.

Those with little or no supplementary income besides Social Security benefits typically won’t incur any taxes on their payments. Furthermore, individuals who solely obtain Social Security benefits may not be obligated to file a federal tax return.

To accurately determine how much you may owe, it is important to consider your filing status and the combined income formula. This can become a bit convoluted, so it helps to break it down into smaller parts.

Add up your adjusted gross income and any nontaxable interest earned in the current year, and then add one-half of your Social Security benefits. Doing this can accurately assess what you are expected to pay.

How To Pay Taxes On Social Security

Incorporating the debt in your Tax Day filing is one option if taxes are owed on Social Security income. Alternatively, those affected can choose a pay income tax method to settle the obligation when calculating annual taxes.

Alternatively, estimated taxes might be better if you are liable for quarterly estimated tax payments. It provides an efficient way of paying your bill without worrying about any potential penalties or interest charges that may arise due to late payments.

Alternatively, if you anticipate that your Social Security benefits will be taxable, it may be worthwhile to withhold a federal income tax from your payments. This is a prudent approach similar to deducting taxes from your paycheck when employed full-time.

This can help you avoid owing a large amount of federal income taxes at the end of the year and ensure that you pay only what is due.

How To Reduce Your Social Security Tax Liability

If you believe you are liable to pay federal income taxes related to receiving Social Security benefits, there are several options to reduce the amount. Consider the following suggestions to minimize any tax burden:

Reduce Business Profits

Additionally, business owners can diminish their overall tax obligation by capitalizing on deductions. This can provide a great monetary benefit and impart more of their money back to them.

It’s important to look into all the different types of business tax write-offs that may apply to your situation to get the most out of them. Doing so can help save you a significant amount on your yearly taxes.

Limit Retirement Withdrawals

Regarding decreasing taxes, it can be beneficial to lower the amount you take from retirement income; however, adhering to the required minimum distribution (RMD) rules must still be done.

At age 72, with applicable taxable retirement accounts, it’s best to take out at least the minimum, as a withdrawal less than that may result in an additional tax burden.

Sell Capital Assets Strategically

If you possess capital assets, such as bonds, stocks, or real estate, it is advisable to consult with a tax specialist to determine the optimal time to sell those assets. Selling these assets at a loss can be advantageous since it can lower your taxable income.

Social Security Benefits Tax Tool

It is well-known that the IRS can be quite complex. Therefore, the straightforward example may not apply to your unique situation. If this is the case, it is recommended that you use the Interactive Tax Assistant (ITA), which will help guide you through all of the potential complications and accurately compute how much of your income should be subject to taxation.

Additionally, for more information about these rules, please refer to IRS Notice 703 for a detailed explanation regarding taxes on benefits.

Are Spousal, Disability, Survivor, and SSI Benefits Taxable?

The Social Security program for retirees serves as a model for SSI, Supplemental Security Income, and other programs regarding rules and regulations.

Spousal Benefits

Suppose Social Security benefits have not been directly awarded to an individual. In that case, their partner can still obtain spousal Social Security benefits for all recipients under the same rules and regulations. If your income exceeds $25,000, taxes will be imposed on up to half of the benefit amount; should it exceed $34,000, the percentage rises to 85%.

Survivor Benefits

Survivor benefits paid to children are typically not subject to taxation, as most children generally do not have any other income that would reach the taxable thresholds.

As such, parents or guardians who receive these benefits on behalf of the minor beneficiaries do not need to include them in their tax returns.

This is a highly beneficial exemption for surviving families who may otherwise face financial hardship due to the unfortunate loss of a loved one.

Disability Benefits

Social Security disability benefits are subject to the same taxation rules as the Social Security retirement program. If the recipient’s overall income exceeds a certain amount, these benefits will be taxable. In 2021, this threshold was set at $25,000 for an individual and $32,000 for couples who file their taxes jointly.

Consequently, keeping track of your total income is important when determining if you need to pay taxes on your disability benefits.

SSI Benefits

SSI, or Supplemental Security Income, is not to be confused with Social Security benefits; this program is a needs-based initiative designed specifically for individuals who are disabled, blind, or aged 65 and above.

The good news is that SSI benefits are not taxable – so you can rest assured knowing that the income from this supportive program won’t cause any complications when filing your taxes.

Understanding If Social Security Is Taxable Income

As we discussed, it is important to understand if and how Social Security benefits are taxable. Your Social Security benefits will be taxed depending on your combined income from retirement accounts and wages.

Estimating your combined income can be confusing, so seek advice, if needed, to better understand this situation and ensure that you reach an accurate conclusion on whether Social Security is taxable.

Always consult a certified financial advisor to answer any questions to make the best tax decision.

No one knows your finances better than you, so take a proactive approach by researching and obtaining professional assistance based on what best fits your needs.

By doing this, you can ensure that both your current and future finances remain in good health.


  • Scott Hall

    Scott realized about 5 years ago that he was woefully behind on retirement savings and needed to catch up. He began writing about it on

    View all posts

Related Posts