You have reached the age when you are collecting Social Security. Do you have to pay income tax on social security benefits? The answer is that it depends. Your benefits might be either non-taxable or partially taxable depending on how much extra income you have from other sources.
If Social Security is your only source of income, your Social Security income is not taxable.
If you have other sources of income in addition to your Social Security benefits, a portion of your benefits might become taxable. You can use the Social Security Benefits Worksheet in the Instructions for Form 1040 to calculate your taxable amount but here’s how it works.
First, calculate your provisional income, which is the total income from all other sources, including tax-exempt income, plus half of the Social Security benefits you receive. Then, compare it to the base amounts in the chart below.
| Filing status | Base amount | Additional amount |
| Single | $25,000 | $34,000 |
| Head of Household | $25,000 | $34,000 |
| Qualifying Widow(er) | $25,000 | $34,000 |
| Married Filing Jointly | $32,000 | $44,000 |
| Married Filing Separately | $0 |
Let’s look at an example of calculating tax on social security benefits
Assume you collect $12,000 a year in investment income. You work part-time and earned $8,000 doing so. You collect $20,000 a year in Social Security benefits.
Your provisional income is $30,000: your investment income plus your wages plus $10,000 or 50 percent of your Social Security benefits.
If your filing status is Single, Head of Household, or Qualifying Widow(er), your provisional income is $5,000 more than the base amount of $25,000. That means you are required to pay taxes on some portion of your Social Security benefits. If the total had come out to less than the base amount of $25,000, your benefits would have been tax-free.
Now, let’s consider the other column, the “additional amount.” Your total provisional income of $30,000 is more than the base amount for your filing status but it’s less than this additional amount of $34,000. That means you would have to pay taxes on 50 percent of your Social Security benefits. In other words, you’ll have to report and pay income tax on $10,000 of your $20,000 in Social Security income.
It would be different if your total provisional income was more than $34,000 in 2018. You would have to pay income tax on $ 17,000 (85% of your $ 20,000 of Social Security benefits).
The same base amount and additional amount rules apply if you’re married and filing a joint tax return. However, the calculation would be based on the combination of both your incomes and both your Social Security benefits.
In any case, whether you’re married or single, the taxable portion of your Social Security benefits cannot exceed 85 percent of your total benefits.
While the above information is in regard to your federal income tax, you have to consider whether or not your benefits are taxed by the state. A majority, but not all, of the states exclude Social Security income from taxation. Indiana is among the states that does not tax Social Security income.
When you have questions, or need help regarding your taxes, do not hesitate to contact me. Together we can make it make sense for you.
Dan