Nearly 68 million Americans, mostly pensioners, receive Social Security benefits each month, according to the Social Security Administration (SSA). Knowing if your SSA benefits are taxable is essential as tax season draws near.
Everything you need to know, such as tax thresholds, state taxes, and the potential taxation of your benefits, will be explained in this article.
Is Social Security Income Taxable?
A federal program called Social Security was created to give Americans financial support, particularly to seniors and people with disabilities. For many people over 65, it is their main source of income; as of 2024, the average monthly benefit was $1,918.
Payroll taxes are used to fund this program, and businesses and employees make contributions to it over the course of a worker’s career.
Although Social Security benefits are subject to taxation, your total income determines whether you owe taxes. This metric is computed by adding half of your Social Security payments to all of your other income, including dividends, earnings, and pensions.
Individual filers or those filing separately may be required to pay taxes on their benefits if their total income over $25,000. The barrier is $32,000 for married couples filing jointly.
State Taxes on Social Security Benefits
Some states impose taxes on Social Security in addition to federal taxes. Social Security payouts are subject to state taxes in nine states as of 2024:
- Colorado
- Connecticut
- Kansas
- Minnesota
- Montana
- Mexico
- Rhode Island
- Utah
- Vermont
Since these states have varied laws, it’s crucial to examine your state’s laws or speak with a tax expert.
How Much Social Security Benefits Will Be Taxed?
Your income bracket determines how much of your benefits will be taxed:
- If you earn between $25,000-$34,000 as a single person, or between $32,000 and $44,000 as a married couple filing taxes together, up to half of your benefits might be taxed.
- If your income is more than $34,000 for single filers or in case of married couples $44,000 filing together, up to 85% of your benefits may be taxed.
Is Supplemental Security Income (SSI) Taxed?
No, there is no tax on Supplemental Security Income (SSI). Unlike traditional Social Security, this program is intended for people with low incomes and resources. You must be blind, disabled, or 65 years of age or older to be eligible.
In conclusion, your total income and filing status determine how much you owe, even though Social Security benefits are subject to federal taxes. If your income surpasses the predetermined criteria, you may be taxed on up to 85% of your benefits. Reviewing both federal and state tax laws is crucial since Social Security income is taxed in nine states. You are not required to pay taxes on SSI benefits if you get them.
Are you preparing for tax season? To learn more about your unique circumstances and potential debt, be sure to speak with a tax expert.
FAQs
Your benefits are taxable if your combined income exceeds $25,000 as a single filer or $32,000 as a married couple filing jointly.
No, only nine states tax Social Security benefits as of 2024. These states include Colorado, Connecticut, and others.
Depending on your income, up to 50% or 85% of your benefits may be subject to federal taxes.
No, Supplemental Security Income (SSI) is not taxable.
You can use the IRS’s interactive tax assistant to determine if any portion of your Social Security benefits will be taxed.
