Do you know how much your Social Security benefits can be taxed? According to the Internal Revenue Service (IRS) located at www.irs.gov, Social security benefits include monthly retirement, survivor and disability benefits. They don’t include supplemental security income (SSI) payments, which aren’t taxable. The net amount of social security benefits that you receive from the Social Security Administration is reported in Box 5 of Form SSA-1099, Social Security Benefit Statement, and you report that amount on your income tax return (Form 1040, line 20a or Form 1040A, Line 14a).
The IRS continues by stating that the taxable portion of the benefits that’s included in your income and used to calculate your income tax liability depends on the total amount of your income and benefits for the taxable year. You report the taxable portion of your social security benefits on Form 1040, line 20b or Form 1040A, line 14b.
Some people must pay taxes on part of their Social Security benefits. Others find that their benefits aren’t taxable. If you get Social Security, the IRS can help you determine if some of your benefits are taxable.
Here are five tips about how Social Security affects your taxes:
1. If you received these benefits in 2017, you should have received a Form SSA-1099, Social Security Benefit Statement, showing the amount.
2. If Social Security was your only source of income in 2017, your benefits may not be taxable. You also may not need to file a federal income tax return.
3. If you get income from other sources, then you may have to pay taxes on some of your benefits.
4. Your income and filing status affect whether you must pay taxes on your Social Security.
5. To find out whether any of your benefits may be taxable, compare the base amount for your filing status with the total of:
• One-half of your benefits; plus
• All of your other income, including tax-exempt interest.
The base amount for your filing status is:
• $25,000 if you’re single, head of household, or qualifying widow(er),
• $25,000 if you’re married filing separately and lived apart from your spouse for the entire year,
• $32,000 if you’re married filing jointly,
• $0 if you’re married filing separately and lived with your spouse at any time during the tax year.
Tax Formula Tip: Here’s a quick way to find out if a taxpayer must pay taxes on their Social Security benefits: Add one-half of the Social Security income to all other income, including tax-exempt interest. Then compare that amount to the base amount for their filing status. If the total is more than the base amount, some of their benefits may be taxable.
If you’re married and file a joint return, you and your spouse must combine your incomes and social security benefits when figuring the taxable portion of your benefits. Even if your spouse didn’t receive any benefits, you must add your spouse’s income to yours when figuring on a joint return if any of your benefits are taxable.
You can figure the taxable amount of the benefits on a worksheet in the Instructions for Form 1040, Instructions for Form 1040A, or in Publication 915, “Social Security and Equivalent Railroad Retirement Benefits“.
If you find all this confusing, I suggest watching this IRS produced YouTube video: https://www.youtube.com/watch?v=qIzmSqHrHlM