The IRS considers marital status and provisional income to determine whether Social Security benefits are taxable. Provisional income includes adjusted gross income, nontaxable interest, and half-annual Social Security benefits. Benefits are not taxable for single filers if provisional income is under $25,000.
Up to 50% of benefits are taxable if provisional income is between $25,000 and $34,000. Up to 85% of benefits are taxable if provisional income exceeds $34,000. Benefits are not taxable for married couples filing jointly if provisional income is under $32,000.
Up to 50% of benefits are taxable if provisional income is between $32,000 and $44,000, and up to 85% if provisional income exceeds $44,000. The bracket determines what percentage of benefits are subject to ordinary income tax.
Social Security taxation factors explained
For example, someone in the 22% tax bracket would pay 22% tax on up to 85% of their benefits. These taxes are becoming more common because the thresholds are not indexed for inflation.
As incomes and benefits rise, more retirees end up in the taxable range. President Trump has stated he would like the thresholds adjusted for inflation, but that requires an act of Congress. In the meantime, seniors can reduce taxes owed by limiting taxable retirement withdrawals and relying more on Roth savings.
The IRS offers payment plans for those who owe taxes they cannot afford to pay all at once. Attempting to evade these taxes should be avoided, as the IRS can garnish Social Security checks directly. Consulting a tax professional can provide personalized advice on how Social Security benefit taxes could impact an individual’s situation.
They can also advise on any state-level taxes that may apply in the states that still tax Social Security benefits.
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