Social Security Taxes: How Much Do Recipients Really Pay?
Key Points
Depending on your age and income, your Social Security benefits may not be taxed.
Regardless of income, the IRS will never tax more than 85% of your benefits.
Based on where you live, you may also face state taxes on benefits.
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If you've spent decades having money taken out of your paycheck to cover Social Security tax, it might seem odd that the government wants you to pay taxes on your benefits. However, Uncle Sam is quite keen on collecting, and you can add it to the other taxes you'll need to pay in retirement.
Here's the scoop on how much in taxes Social Security recipients pay.
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Who must pay?
If you add up your adjusted gross income (AGI), income from tax-exempt interest, and half of your Social Security benefits for the year, you'll end up with your "combined" or "provisional" income. It's this amount that determines whether you'll owe taxes on benefits.
|
Filing Status |
Combined Income |
Taxes |
|---|---|---|
|
Single/Head of household |
Less than $25,000 |
Not taxed |
|
Couple filing jointly |
Less than $32,000 |
Not taxed |
|
Single/Head of household |
$25,000 to $34,000 |
Up to 50% of benefits taxed |
|
Couple filing jointly |
$32,000 to $44,000 |
Up to 50% of benefits taxed |
|
Single/Head of household |
More than $34,000 |
Up to 85% of benefits taxed |
|
Couple filing jointly |
More than $44,000 |
Up to 85% of benefits taxed |
Data source: Fidelity.
To make it easier, you can ask the IRS to withhold taxes from your benefits. If, for any reason, it becomes clear that more was withheld than necessary, you'll receive a refund.
If you're currently retired and haven't requested that the IRS withhold taxes, you can do so by signing in to or creating a my Social Security account. While there, you can check, start, change, or stop Voluntary Tax Withholding (VTW).
If you're required to pay federal taxes on your benefits, they will be taxed at your ordinary tax rate.
You may owe state taxes on benefits
If you live in one of the following states, you may have to pay state taxes on Social Security benefits:
- Colorado
- Connecticut
- Minnesota
- Montana
- New Mexico
- Rhode Island
- Utah
- Vermont
Whether you're taxed at all depends on age and income. If you're planning for retirement with the goal of saving as much as possible on taxes, it could pay to seek a professional opinion.
A financial advisor has undoubtedly helped other retirees keep more money in their pockets at tax time and may be an excellent resource for you as you learn the ropes.
While it's never fun to pay taxes, there is a sliver of good news. No matter how much you earn, the IRS will never tax more than 85% of your Social Security benefits.
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