Certified Public Accountants
Call Us: 440-926-9300
A Firm that Cares About its Clients. Large Enough to Know, Small Enough to Care...
Do You Have to Pay Taxes on Social Security Benefits?
It used to be so simple: Social Security benefits were tax-free. Period. But then, as part of a "Save Social Security" plan, Congress decided to tax up to 50% of benefits. Later, lawmakers decided to tax up to 85%, with the extra revenue going to shore up Medicare.
First the good news: About 70% of all beneficiaries are still safe.
You’re among the 18 million or so who aren’t so lucky, though, if your “provisional income” is more than $25,000 on a single return or $32,000 on a joint return. Provisional income is adjusted gross income (not including Social Security) plus 50% of your benefits plus any tax-free interest from municipal bonds.
If that income is between $25,000 and $34,00 on a single return or between $32,000 and $44,000 on a joint return, up to 50% of your benefits can be taxed. The rest is tax-free.
Now, if your provisional income is more than $34,000 on a single return or $44,000 on a joint return, it’s likely that 85% of your benefits will be taxed.
Finally, don’t assume that your state taxes the same amount of benefits as Uncle Sam. In most states, Social Security is still completely tax-free. Take a look at our state-by-state guide to taxes on retirees to learn more about how you will be taxed during retirement based on where you live.
