Social Security Benefits

Social Security benefits provide a source of income for retirees and are funded by a payroll tax on wages. How much tax you pay on your Social Security benefits depends on your total income, including other income sources besides Social Security. The federal government taxes retirement benefits for many people, but a portion of those benefits is tax-exempt. Generally, the lower your retirement income, the larger the exemption you’ll receive. To determine the taxable percentage of your Social Security income, the IRS looks at two things: 1. Your annual combined income: This includes any income you earn from wages, capital gains, retirement plan distributions, pension payments, business income, and half your Social Security benefits. 2. Your marital status: If married, your taxable limit will be higher. Supplemental security income (SSI) is not taxable. This benefit is for low-income people who are blind, 65 or older, or have a qualifying disability. Every year, the Social Security Administration sends a form SSA-1099. This form shows the total Social Security benefits you received during the tax year, including monthly retirement, survivor, and disability benefits. If you have not received your form SSA-1099 when it is time to file taxes, you can get a new copy from the Social Security Administration’s website. Income thresholds and taxation rates You must pay tax on Social Security payments once your annual taxable income reaches $25,000 (or $32,000 if you are married and file jointly). How much tax you pay depends on how far you exceed the limit. • If you file as an individual: • Up to $25,000: No tax • $25,000–$34,000: Up to 50% of your benefits may be taxed. • More than $34,000: Up to 85% of your benefits may be taxed. • If you file a joint return: • Up to $32,000: No tax • $32,000–$44,000: Up to 50% of your benefits may be taxed. • More than $44,000: Up to 85% of your benefits may be taxed. If you need more information or have questions about Social Security benefits and how they impact your taxes, we’re here to help. Contact us today, give us a call at (631) 585-9698.