Social Security Benefits and Taxes

Social Security
Income

One of the first questions most Social Security Benefit recipients want to know if there Social Security income is taxable income. If you are still working when you receive Social Security Benefits and you have income from other sources, it is possible that a portion of your Social Security income will be taxable.

Generally, if your Social Security benefits is your only source of income, then it is usually not considered taxable income and thus it's not taxed. 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 given tax year.

However, whether or not your your Social Security income is taxable, and how much is taxable depends on your total income from all sources and your IRS tax return filing status. The easiest and most accurate way for the current tax year 2019 to find out if you need to pay taxes on your Social Security income is to start a free tax return on eFile.com. The eFile.com tax return calculation is very comprehensive and very reliable. Based on the information you provide through the online tax question via your Form 1099-SSA and other income sources (if you have them), the we will determine whether or not you have to pay Social Security taxes and if so. As a result the eFile.com tax application will calculate the amount and prepare all the income tax return forms necessary for you so you can e-File tax return and report your Social Security benefits.

If you need more information on Social Security and how it affects your tax return, see the information below.

Social Security Income

Generally your Social Security income will only be taxed if you have income from other sources and your combined income is more than a certain base amount. If Social Security is your only source of income, then generally you do not need to file a tax return, of course there may be other reasons that you need to file a return.

Social security income includes: 

Social Security income does not include Supplemental Security Income payments. Those payments are not taxable.

Below are samples that should help you better understand different scenarios.

A Quick & Easy Look -  SEE if Your Social Security Income might be Taxable:

  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 use the easiest method which is to prepare your return on eFile.com to find out exactly how much of your Social Security income is taxable.

Here are some examples of social security income and how much is taxable and how much is not (NOTE, these examples are for 2018 returns. We will update this as soon as possible for 2019 returns):

Example 1 - Randy will be filing with a Single filing status on his return. His income for 2018 includes a taxable pension of $18,600, W-2 wages of $9,400, and taxable interest of $990, for a total of $28,990. In addition, he has social security benefits of $5,980. In this case, his taxable social security benefits would be $2,990, so only about 50% of his social security income is taxable.

Example 2 - John and Denise are married and will be filing with a Married Filing Joint filing status on their return. John is retired and his income includes a taxable pension of $15,500. He also received $5,600 in social security benefits. Denise had W-2 income of $14,000. Denise made a deductible payment to her IRA for $1,000. They both have about $250 in taxable interest income. In their case, none of John's social security income is taxable.

Example 3 - Sue and Joe are married and will be filing with a Married Filing Joint filing status on their return. Joe is retired and received a Form RRB-1099 for railroad retirement benefits for $10,000. Sue is also retired and her income is from a taxable pension for $38,000. They both have $2,300 in taxable interest income and $200 from a savings bond. In this case, their taxable social security benefits would be about $6,275 or 63% of Joe's social security income.

Social Security Income and Other Types of Income:

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. There is a worksheet to help you calculate it. 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% and this is all calculated by eFile.com when you prepare your return.

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.

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.

Social Security Income and your State Return

Most states do not tax Social Security income, however there are about 13 states that do:

  • Colorado
  • Connecticut
  • Kansas
  • Minnesota
  • Missouri
  • Montana
  • Nebraska
  • New Mexico
  • North Dakota
  • Rhode Island
  • Utah
  • Vermont
  • West Virginia

How these states tax Social Security depends on your Adjusted Gross Income (AGI) and other criteria. Check with your state for more details.

Social Security and Taxes - A Brief History to Current

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. Employees 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.

FICA Taxes by Tax Year
Tax Year 2019
Social Security: 6.2%
Medicare: 1.45%
Tax Year 2018
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. You generally owe Social Security taxes on the first $132,900 of your 2019 gross income. Medicare taxes are generally paid on 100% of your annual income.

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 $132,900 in 2019, you may have had too much money withheld for Social Security taxes. Any Social Security taxes paid on Tax Year 2019 income from $132,900  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 7.65%), you should ask your employer for a refund of the overpayment before filing a tax return.

Unreported Social Security and Medicare

When your employer pays you wages, they are required withhold a portion of your paycheck for Social Security and Medicare taxes. It sometimes happens that an employer might not withhold enough of these taxes. If this happens, you might have to pay these taxes when you file your return. In addition you will most likely need to file a Form 8919. If this is the case, eFile.com will prepare this form for you so that you can pay the needed taxes and file the required Form 8919 with your return.

How to efile Social Security on Your Tax Return

If you prepare your tax return on eFile.com, and you have taxable income, we will determine the correct amount of tax on your Social Security benefits, and we will prepare the correct forms that you need to report your Social Security income with your return. If any amount of your Social Security benefits are taxable, you can file your tax return on Form 1040.

Learn more about Social Security and your taxes in IRS Publication 915 - Social Security and Equivalent Railroad Retirement Benefits.