Are Social Security Benefits Taxable Income?

If you receive Social Security benefits, you will be sent a Form 1099-SSA which will show the total dollar amount of your Social Security income for the year. But do you have to pay taxes on your Social Security benefits?

If you have income from other sources besides Social Security, it is possible that a portion of your Social Security income will be taxable. Whether it is, and how much of it is taxable, depends on your marital status and your total income from all sources.

Is My Social Security Income Taxable?

TaxTip: Because it is so complicated to calculate the amount of Social Security income that is taxable, it is highly recommended that you use tax software, such as efile.com, to prepare your tax return.

If Social Security is your only income, it is almost never taxable. (Your benefits would have to be unusually generous for the income to be taxable.)

If you also had income from other sources, your Social Security income will only be taxed if your combined income is more than a certain amount. This amount (called the "base amount") depends on your filing status. But you don't just add all of your income together and compare it to the base amount (no, it couldn't be that simple). There is a worksheet to figure it all out. This is because, even if your Social Security is taxable, only a portion of it will actually be taxed. The maximum amount that may be taxed is 85%. This is all calculated in the worksheet, or by the efile.com online tax preparation software.

There are a few things that could make the computations even more complicated, and could make you owe a bit more or less tax on your benefits. These include receiving foreign income, receiving and excluding income from Series EE or Series I U.S. Savings Bonds, receiving adoption assistance from your employer, contributing to an IRA while being covered by a qualified retirement plan, and receiving Railroad Retirement Benefits.

A Quick Way to Tell if Your Social Security Income Might Be Taxable or Not:

  1. Add half of your Social Security income to all of your other income, including non-taxable interest and other excluded income.
  2. Compare this total to the base amount for your filing status:
  3. If your total income is more than the base amount, you might owe some tax on your Social Security benefits. You can use the worksheet in the Form 1040 Instructions, or the efile.com tax preparation software, to find out exactly how much of your Social Security income is taxable.

Learn more in Publication 915 - Social Security and Equivalent Railroad Retirement Benefits.

Why Do I Pay Social Security Taxes?

Just about everyone who earns an income from working has to pay FICA (Federal Insurance Contributions Act) tax. This payroll tax is made up of Social Security and Medicare taxes, which are used to ensure that those government programs remain funded.

How Do I Pay Social Security and Medicare Taxes?

Employees generally have Social Security and Medicare taxes withheld from their pay along with income taxes. The self-employed have to pay Social Security and Medicare taxes through self-employment taxes.

How Much Are Social Security and Medicare Taxes?

The 2014 rates for employee FICA taxes are:

  • Social Security: 6.2%
  • Medicare: 1.45%

The amount that you pay in Social Security taxes throughout one's working career is associated with the social security benefits that you receive later in life, but the amount you contribute will not equal the amount of benefits to which you have access.

What Are the Limits on Social Security Taxes?

You generally owe Social Security taxes on the first $117,000 of your 2014 gross income. Medicare taxes are generally paid on 100% of your annual income.

What Is Excess Social Security Tax?

If you had more than one employer who each withheld taxes from your pay, and if your total gross income was over $117,000 in 2014, you may have had too much money withheld for Social Security taxes. Any Social Security taxes paid on Tax Year 2014 income from $117,000 to infinity is considered excess social security tax and will be refunded to you (or credited against your income tax balance due) when you file a tax return.

If your employer erroneously withheld too much Social Security taxes from your pay (for example, more than 4.2%), you should ask your employer for a refund of the overpayment before filing a tax return.

Can I efile Social Security Income on My Tax Return?

If you prepare your tax return on efile.com, and you have taxable income, the online software will determine the correct amount of tax on your Social Security benefits, and the correct forms for you to use. If any amount of your Social Security benefits are taxable, you can file your tax return on Form 1040A or Form 1040(Not sure which form you should file? Find out which Form 1040 to file).

Unfortunately, taxable Social Security income cannot be claimed on a Form 1040EZ, so you will not qualify to use the Free Federal Edition. But our prices for preparing a 1040A efile it or a 1040 efile it are the lowest around (and the accuracy, ease-of-use, and peace-of-mind are well worth the low price)! Compare our tax return preparation prices.

If your only income is nontaxable, then you are not required to file a tax return (see the filing requirements), and regrettably, the efile.com software will not be able to generate a return for you.

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