11 Things Retirees Need To Know About Social Security and Taxes

Learn how to navigate the tax maze and make the most of your Social Security benefits.
Updated Nov. 27, 2023
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Once you reach retirement age and start receiving a monthly Social Security check, you might think your days of paying taxes are behind you, at least when it comes to paying taxes on Social Security benefits. 

Unfortunately, just like any other type of earned income, Social Security benefits for retirees are subject to federal income taxes. 

Keep reading as we set the record straight with these 11 crucial facts about Social Security, retirement, and taxation. The more you know, the easier it is to build your wealth.

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Your Social Security benefits may be taxable depending on your combined income

Vitalii Vodolazskyi/Adobe social security tax

For the most part, Social Security benefits don’t offer enough money to live off. As a result, many seniors supplement Social Security with money from savings, a part-time job, or self-employed gig work.

If the combined income from your income sources exceeds a certain level, your Social Security benefits will be subject to a tax.

Only half of your Social Security income counts toward your overall combined income

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To calculate your combined income, add up your gross income from all sources besides your Social Security benefits. Then, add any nontaxable interest accrued over the year. 

Finally, add half the amount of your annual benefits (not the full amount) to calculate your total combined income.

The final amount is the income level that determines whether you’ll pay taxes on Social Security benefits.

Typically, only 85% of your benefit will be taxed

Snyfer/Adobe tax preparation

Even if your combined retirement income is high enough that you’ll pay taxes on your benefits, you probably won’t have to pay taxes on the full benefit amount. 

Instead, if you report an annual combined income of over $34,000 as an individual or over $44,000 as a married couple filing jointly, no more than 85% of your benefits can be taxed.

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If your retirement income is below a certain threshold, only 50% of your benefits will be taxed

Chuck/Adobe social security

If your combined income totals anywhere between $25,000 and $34,000 as an individual or between $32,000 and $44,000 as a married couple filing jointly, only up to 50% of your Social Security benefit may be taxed.

You’ll continue to pay taxes as long as your combined income exceeds a certain threshold, no matter how old you are

Lane Erickson/Adobe retirement planning payment

You might have heard that once you reach a certain age, you’ll no longer be required to pay taxes — either at all or on your Social Security benefits. 

Unfortunately, the adage about death and taxes is true no matter how old you are: Taxes are simply inescapable.

When determining your tax eligibility, age isn’t part of the equation. Your combined income is all that matters. 

And if that amount exceeds $34,000 or $44,000 (depending on your filing status), you’ll end up paying taxes on your benefits whether you’re 65, 85, or 105.

Survivors benefits and SSDI benefits are taxable too

Jason Raff/Adobe taxation and other purposes

Social Security retirement benefits aren’t the only benefits you could end up paying taxes on. If you’re receiving survivor benefits or Social Security Disability Insurance (SSDI) benefits, you could also pay taxes on your benefits depending on your combined income.

As with Social Security payments, you’ll calculate your combined income by adding your adjusted gross income to your taxable interest and half of your total survivors or SSDI benefits amount.

If you earn less than $25,000 as an individual or $32,000 as a married couple filing jointly, you won’t pay taxes on your benefits. Otherwise, you could pay taxes on up to 85% of your total benefits amount.

Only Supplemental Security Income (SSI) is not subject to taxation

Julien BASTIDE/Adobe balancing the accounts

Supplemental Security Income is administered by the Social Security Administration, but it’s entirely separate from the Social Security benefits program.

Instead of supporting retirees who paid into the Social Security system during their working years, SSI is intended solely for people ages 65 and older who have extremely low incomes or assets and are blind or otherwise disabled. 

Crucially, while Social Security benefits can be taxed, SSI benefits are not taxable.

You can make quarterly estimated payments on your Social Security benefits tax

Dragana Gordic/Adobe worried about finance safety

As any self-employed individual knows, the federal government allows you (and sometimes expects you) to make quarterly estimated income tax payments.

If you’re worried about the feasibility of potentially making a lump-sum tax payment in April, you can choose to make estimated tax payments every quarter instead. You can pay online using the IRS’s secure online payment portal.

You can also request taxes to be withheld from your monthly benefits checks

Yurii Kibalnik/Adobe social security tax with inscription

If you don’t want to deal with the hassle of estimating taxes and submitting quarterly payments online, you can request that the SSA deduct your estimated taxes before depositing your monthly Social Security payment. 

To submit a request, you must complete IRS Form W-4 V and mail or fax it to your local Social Security office.

Taxes on benefits contribute to the Social Security benefits fund

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Any federal taxes you end up paying on your Social Security benefits will go right back into the Social Security fund. 

Instead of being distributed across other government programs, benefits taxes continue directly supporting the retirement fund that helps keep you afloat after quitting the workforce for good.

Some states also tax Social Security benefits

wolterke/Adobe united states social security office

For the most part, states do not tax federal Social Security benefits, including retirement benefits, SSDI benefits, and survivor benefits. However, some states require residents to pay taxes on their Social Security benefits depending on their income level.

If you live in West Virginia, Vermont, Utah, Rhode Island, New Mexico, Nebraska, Montana, Missouri, Minnesota, Kansas, Connecticut, or Colorado. In that case, you’ll want to talk to your tax advisor about whether or not you’ll owe state income taxes on your Social Security payments. 

Otherwise, you shouldn’t have to worry about state taxes and can stick to figuring out federal taxes only.

Bottom line

goodluz/Adobe filling pension paper

For better or worse, taxes are always a part of life — even your retired life and even when you’re receiving benefits from a fund you contributed to with your payroll taxes.

Once you know you could owe taxes on your benefits, it’s much easier to plan for your financial future

Whether you’re a few months away from retirement or more than 40 years away, consider benefits-related taxes as you strategize for retirement and set your savings goals.

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Author Details

Michelle Smith Michelle Smith has spent a decade writing for and about small businesses. She specializes in all things finance and has written for publications like G2 and SmallBizDaily. When she's not writing for work at her desk, you can usually find her writing for pleasure near large bodies of water.

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