Like many other overly-complicated parts of the federal tax code, the taxation of Social Security benefits is no exception. This post is meant to give a general overview of the taxation and reporting requirements for Social Security benefits. To determine if your Social Security benefits are taxable, compare the base amount for your filing status with half of your Social Security benefits and all other income including tax-exempt interest. The base amounts are:
- $25,000 for single, head of household, or a qualifying widow(er).
- $25,000 for married filing separately and you lived apart from your spouse all year.
- $32,000 for married filing jointly.
- $0 if you are married filing separately and lived with your spouse at any time during the year.
However, you can’t reduce other income by any exclusions for: interest from qualified U.S. savings bonds, employer provided adoption benefits, foreign earned income or foreign housing, or income earned by bona-fide residents of American Samoa or Puerto Rico. If the total does exceed your base amount, part of the Social Security benefits may be taxable. Also, if you are filing married filing jointly, you and your spouse must combine your income and benefits to determine whether any of the benefits are taxable. This is regardless of whether your spouse received benefits. Generally, up to 50% of Social Security benefits are taxable, but it can be 85% if either of the following apply:
- The total of half your Social Security benefits and all other income is more than $34,000 or $44,000 for married filing jointly taxpayers.
- You are filing married filing separately and lived with your spouse at any time during the applicable tax year.
For tax reporting purposes use the amount in box five from Form SSA-1099, the net total benefits, to determine whether any of the benefits are taxable. If it turns out they are partially taxable, you must use Form 1040 or 1040A, not Form 1040EZ. The net total benefits (box 5) are reported on line 20a of the 1040 and the taxable amount on line 20b. For Form 1040A, use line 14a and 14b.
If you’d like to read more about the tax implications of Social Security benefits check out IRS Publication 915 here –
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