how is social security income taxed

When Is Social Security Income Taxable?

Many taxpayers believe that if they are on Social Security (SS), it is not taxable. This can lead to a nasty surprise when they file taxes, since they were not expecting a tax bill. The Social Security Administration estimates that 56% of beneficiary families owe federal taxes on their SS benefits. Is your family one of them?

If Social Security is your only income, then it is very likely that you won’t pay any federal income tax on those benefits. However, if you have additional income through wages, 401(k)s, capital gains, etc., then you may owe taxes on a portion of your Social Security. With careful planning, you can prepare for and even reduce the taxes that you may owe.

Combined Income Limits for Social Security Benefits

Your Social Security benefits include retirement, spousal benefits, survivor benefits, and Social Security Disability Insurance (SSDI), but not supplemental security income (SSI). SSI is not taxable. No matter how much you make, you will not pay federal income taxes on more than 85% of your Social Security income.

The tax brackets for owing taxes on Social Security are based on “combined income.” The Internal Revenue Service defines combined income limits for Social Security beneficiaries based on their filing status. The 2022 income limits are:

  • Single filers, qualifying widow/er, married filing separately: Up to 50% of Social Security benefits are taxable if combined income is between $25,000 and $34,000. Up to 85% of Social Security benefits are taxable for combined income above $34,000.
  • Married filing jointly: Up to 50% of Social Security benefits are taxable if combined income is between $32,000 and $44,000. Up to 85% of Social Security benefits are taxable for combined income above $44,000.

So what does “combined income” mean?

The formula for combined income is half your Social Security benefits + your Adjusted Gross Income (AGI) + nontaxable interest. So if you received $18,000 in SS benefits, $20,000 in AGI, and $4,000 in nontaxable interest, your combined income would be (0.5 x $18,000) + $20,000 + $4,000 = $33,000. In this scenario, you would owe taxes on up to 50% of your Social Security benefits—or in other words, $9,000 of your Social Security benefits would be considered taxable income.

Adjusted Gross Income is any income you have from things like wages; retirement accounts like IRAs, 401(k)s and 403(b)s; taxable interest and dividends; and rental income—minus any deductions like certain expenses, HSA contributions, IRA contributions, deductible portion of self-employment tax, tuition and fees.

Municipal bonds are often the source of nontaxable interest, and while the interest is not taxed, it is used in the IRS formula for combined income.

The good news is that most states, including Maryland, do not tax Social Security benefits.

How Can I Avoid or Reduce Federal Income Taxes on Social Security Benefits?

It is possible to reduce this tax bill, but usually you need to plan ahead in order to significantly reduce or avoid taxes on Social Security benefits. In very simple terms, there are three components in the combined income equation, and the only way to reduce taxes is by reducing those components to get you below the taxable threshold.

Reducing AGI and nontaxable interest depends on what those income sources are. Here are some common strategies that might help you get below the Social Security taxable threshold:

  • Prior to retirement, contribute money to a Roth IRA. You can withdraw this money tax-free after you turn 59½, so it won’t contribute to your combined income.
  • Minimize withdrawals from IRAs, 401(k)s, 403(b)s, etc. If possible, try to withdraw from those accounts in the years before you take Social Security.
  • Increase your deductions by increasing your charitable donations, or taking advantage of any other deductions available to you.
  • Contribute to an IRA. Since you’re collecting Social Security, contributing to a retirement account may not make sense for you, but this is a viable way to reduce AGI.
  • Reduce earned income, including wages or business income.
  • Consider selling your municipal bonds. Be aware, this might trigger a capital gains tax, so it may cause a higher tax bill this year, but lower tax bills in the future. This may or may not make sense for your situation.

As you can see, there are no easy answers if you need every bit of income that you have. If your combined income is high above the threshholds, it may not be possible to reduce the numbers enough to impact your taxes.

In this situation, it can be very helpful to talk to a tax professional. Taxes are complicated! A professional knows how to find more deductions that you qualify for, and can help you figure out a plan for reducing your tax bill.

More importantly, if you are unable to pay your tax bill, that can become a big problem for you. An experienced tax attorney, who has helped many people through this same situation, can help you figure out a solution before you start accruing tax penalties and interest.

RELATED: Why Hire A Tax Professional?

Talk to S.H. Block About Reducing Your Social Security Benefit Taxes

If you find yourself in a situation where you have unexpected tax due on Social Security benefits, or you are trying to determine the best way to reduce your taxes, ask the experts at S.H. Block Tax Services. We can look at your specific situation and determine the best course of action for your needs.

Don’t let a tax problem gain momentum with penalties and interest. Stanley H. Block will help you nip it in the bud. For a free consultation, fill out our online form or give our office a call at (410) 872-8376. We’ll get right to work for you!


Purcell, Patrick J. (2015). Income Taxes on Social Security Benefits. Social Security. Retrieved from

The content provided here is for informational purposes only and should not be construed as legal advice on any subject.

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *