Is Social Security Taxable? 9 Simple Ways To Know the Answer for You

People who have worked hard throughout their lives and contributed to Social Security by paying taxes can be shocked to learn that their benefits might also be subject to taxation.

Depending on where you live, you may have to pay federal income tax — and possibly state income tax on a portion of your benefits.

Here's how to know if your Social Security is taxable and tips on reducing your tax burden if you supplement your income.

It’s a common misconception that Social Security benefits are tax-free. In reality, you may end up paying taxes on your monthly benefit. The portion that is taxable depends on your income.

You should factor this reality into your retirement savings planning. Create a strategy for mitigating the impact of these taxes if you can so you can get ahead financially.

Up to 85% of your Social Security benefits payment could face taxation.

Note that this does not mean you lose 85% of your benefits in taxes. Rather, it is the portion of your benefits that could be subject to taxes.

Social Security taxes are based on what is known as “combined income.” This is your adjusted gross income plus nontaxable interest and half of your Social Security benefits from the year.

Taken together, this represents your combined income, and any taxes you owe on Social Security benefits will be based on this figure.

One way some people reduce their combined income is by taking withdrawals from a Roth IRA instead of from other retirement accounts. Roth withdrawals are not considered to be part of combined income.

Single filers with a combined income of under $25,000 and joint filers with a combined income of less than $32,000 owe no tax on Social Security benefits.

From there, tax rates can climb. Up to 50% of your benefits can be taxable if you are a single filer with a combined income of between $25,000 and $34,000 or a joint filer with a combined income of between $32,000 and $44,000.

Finally, up to 85% of your benefits can be taxable if you are a single filer with a combined income above $34,000 or a joint filer with an income above $44,000.

The rules regarding taxation apply to more than just retirement benefits. If you receive other benefits from Social Security trust funds — such as disability or survivor benefits — they also might be subject to taxation.

However, Supplemental Security Income (SSI) benefits are not subject to these rules.

Some states also tax Social Security benefits. In 2024, the states of Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont all apply taxes to benefits.

The amount you pay may depend on various factors, such as your income. In New Mexico, for example, most people don’t pay state taxes on benefits because the income thresholds are much higher.

If you are a resident of one of these states, simply moving to another state for retirement might be one way to lower your tax burden.

If you don’t want to do the math or simply want to double-check the numbers, the IRS offers a tool to help you determine the amount of your benefits that might be taxable.

To use this tool, you will need to know:

• Information that helps determine your gross income
• The value from Box 5 on Form SSA-1099
• If you are receiving railroad retirement benefits, the amount in Box 5 on Form RRB-1099

For those who don’t want to think about paying taxes come April, you can set up withholding. This means some of your benefits will be withheld each month as a way of prepaying your tax bill.

You can choose withholding values of 7%, 10%, 12%, or 22%, depending on how much you want to put aside. To update your current Social Security benefits to reflect this withholding, use Form W-4V from the IRS.

Or, if you prefer, you can also make quarterly estimated tax payments, which will help you cover your tax liability throughout the year.

Keep in mind that when the annual cost-of-living adjustment (COLA) increases the value of your benefits, it could push your income into a higher Social Security tax bracket.

In 2024, the COLA was 3.2%. In 2025, it will be 2.5%. This will directly impact the amount you receive in your benefits, which could push your income into a higher tax bracket.

As you work to build your wealth and make money moves to prepare for retirement, try to find ways to keep Social Security taxes low.

Speak to your accountant and financial planner to determine which strategies can reduce taxation of your Social Security benefits.