Retiree Tax Tip: Tally Taxes on Social Security
Up to 85% of your Social Security benefits may be taxable depending on your income in retirement.
As you start to figure out your tax burden for 2018, don’t forget that Uncle Sam wants a piece of your Social Security benefits. And it’s hard to avoid the tax because the income thresholds are low and not adjusted for inflation.
To determine how much of your benefits will be taxable, tally your adjusted gross income plus nontaxable interest and half of your Social Security benefits. That figure is your combined income.
If you are an individual filer and your combined income is between $25,000 and $34,000, you may owe tax on up to 50% of your benefits. If your combined income is more than $34,000, up to 85% of benefits may be taxable.
Married couples who file jointly have slightly higher income thresholds. If you and your spouse have a combined income between $32,000 and $44,000, you may owe tax on up to half of your benefits. If combined income is more than $44,000, up to 85% of benefits may be taxable. Read more about figuring the tax in Publication 915 at IRS.gov.
If you expect to owe Uncle Sam tax on your benefits, you can choose to have federal taxes withheld from Social Security by filing Form W-4V. You may also owe state tax if you live in one of the 13 states that currently tax Social Security benefits.