Social Security benefits are 100% tax-free when your income is low. As your total income goes up, you’ll pay federal income tax on a portion of the benefits while the rest of your Social Security benefits remain tax-free. This taxable portion goes up as your income rises, but it will never exceed 85%. Even if your annual income is $1 million, at least 15% of your Social Security benefits will stay tax-free.
Taxation of Social Security Benefits
The amount of the taxable Social Security benefits becomes part of your gross income on your tax return. It’s still subject to your normal deductions to arrive at your taxable income. You still pay at your normal tax rates on the taxable amount. 50% or 85% of your benefits being taxable doesn’t mean you’ll lose 50% or 85% of your Social Security to taxes. The actual taxation on your benefits is much less. The tax may actually be zero after applying deductions.
The IRS has a somewhat complex formula to determine how much of your Social Security is taxable and how much of it is tax-free. The formula first calculates a combined income that consists of half of your Social Security benefits plus your other income such as withdrawals from your retirement accounts, interest, dividends, and short-term and long-term capital gains. It also adds any tax-exempt interest from muni bonds. This income is then reduced by a number of above-the-line deductions such as deductible contributions to Traditional IRAs, SEP-IRAs, SIMPLE IRAs, HSAs, deductible self-employment tax, and self-employment health insurance. Finally, this provisional income goes through some thresholds based on your tax filing status (Married Filing Jointly or Single/Head of Household). All of these steps are in Worksheet 1 in IRS Publication 915.
Calculator
You can go through the 19 steps in the worksheet to calculate the amount of social security benefits that will be taxable but the worksheet isn’t the easiest to use. I made an online calculator that helps you calculate much more quickly. After you give three numbers plus your tax filing status, you’ll have your answer with the click of a button.
The calculator works for all types of Social Security benefits. It doesn’t matter whether you’re receiving retirement income benefits, disability benefits, spousal benefits, or survivor benefits as a widow or widower. It only applies to federal taxes though. Different states have different rules on taxing Social Security benefits. State taxes don’t necessarily follow the same rules as the federal government.
When more than 15% of your Social Security is tax-free, additional income outside Social Security will make more of your Social Security benefits taxable, reducing that number toward 15%. Some people call this a tax torpedo, but it’s a misleading term. It gives you the impression that Social Security is taxed more heavily than other income, which is not true. You actually still pay lower taxes than other people with the same income. See why that’s the case in An Unusually High Marginal Tax Rate Means Paying Lower Taxes.
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KD says
Harry, even though a portion of social security may be taxable, one may not actually end up with any “taxable income” due to standard deduction. Is my understanding correct?
Harry Sit says
That’s correct. For example, a married couple filing jointly, both over the age of 65, with $25k Social Security benefits plus $25k other income will see a portion of their Social Security benefits being taxable. When the taxable portion ($2,750) is added to their $25k other income, it still falls under their standard deduction of $28,700 in 2022.
joe oliver says
“When the taxable portion ($2,750) is added to their $25k other income, it still falls under their standard deduction of $28,700 in 2022”. Incorrect amount ???
Standard deduction for 2022, married filing jointly is $25,900 and not $28,700.
thanks
Harry Sit says
People age 65 or older have a higher standard deduction.
Laurel says
When calculating my SS benefits do I still count the $177.10 that’s being taken out monthly for my Medicare premium, or just total what I actually get deposited to my checking account? Thanks
Harry Sit says
You still count the Medicare premium. Deducting the Medicare premium from the Social Security benefits is only for administrative convenience. It doesn’t reduce your Social Security benefits.
Steve says
Thanks Harry – you’re a generous genius.
Tom W says
I recommend the online calculator at https://www.calcxml.com/calculators/how-much-of-my-social-security-benefit-may-be-taxed?
It’s updated annually, handles simple or more complex income scenarios and has been spot on for me over the last 4 years.
Harry Sit says
My calculator gives the same result, and it’s easier to use. It doesn’t require annual updates.
Barbara says
I appreciate all the information you have made available to us retirees. Hubby and I have been drawing social security for less than a year but are wanting to also draw funds from our traditional IRA next year. Using your calculator with current numbers, none of our social security is taxable. Would I insert the amount of IRA withdrawals into other income to calculate how much social security would be taxable next year?
Harry Sit says
Yes, withdrawals from a traditional IRA will be part of your other income outside Social Security.
Brian Raymer says
I have a question regarding your online calculator for estimating the percentage of your social security benefits will be subject to federal income tax. I will be collecting pension benefits, but what else do I include as “Other Income”? Do I include RMDs or any other income I may cash out from any investments or bank accounts? I like the simplicity of your calculator but is it close to being as accurate as the IRS worksheet?
Harry Sit says
Include RMD, interest, dividend, and realized capital gains. Don’t include withdrawals of principal or basis from non-IRA accounts or withdrawals from Roth accounts.
Terry Flick says
I come up with a different answer using your calculator when I input information from Example 1 on page 7 of IRS Publication 915 (2021).
Page 6 of Publication 915 says:
Maximum taxable part. Generally, up to 50% of your benefits will be taxable. However, up to 85% of your benefits can be taxable if either of the following situations applies to you.
• The total of one-half of your benefits and all your other income is more than $34,000
($44,000 if you are married filing jointly).
• You are married filing separately and lived with your spouse at any time during 2021.
Example 1 of the IRS Pub says $2,990 of social security benefits would be taxable, whereas inputting the information into your calculator shows $3,490 would be taxable.
Example 1. George White is single and files Form 1040 for 2021. In addition to receiving social security payments, he received a fully taxable pension of $18,600, wages from a part-time job of $9,400, and taxable interest income of $990, for a total of $28,990. He received a Form SSA-1099 in January 2022 that shows his net social security benefits of $5,980 in box 5.
To figure his taxable benefits, George completes Worksheet 1, shown below. On line 6a of his Form 1040, George enters his net benefits of $5,980. On line 6b, he enters his taxable benefits of $2,990.
The Filled-in Worksheet 1 shows the calculation to arrive at the taxable benefit of $2,990. I input the numbers from Example 1 into the IRS taxable benefit calculator and a few other online calculators and they all showed $2,990 as the taxable benefit.
Here’s how I think of the calculation (using a single filing status from Example 1):
(1) Provisional income ($31,980) minus lower threshold ($25,000) times 50% = $3,490
Provisional income ($31,980) minus upper threshold ($34,000) times 35% = -0-
Total = $3,490
(2) Maximum social security taxed ($5,980 times 50%) = $2,990
Taxable social security benefit is the lesser of (1) or (2).
It appears your calculation is using $5,980 times 85% in (2) = $5,083
In this case, the lesser of (1) or (2) would be $3,490 (the answer given by your calculator).
I feel the IRS Worksheet does not do a good job of walking you through the calculation.
Harry Sit says
Thank you for double-checking. I fixed the error.
Keven says
I received $10,759 from Social Security in 2022. My spouse will make around $40,000.
Will my Social Security be taxed?
Grateful for your service
Thank you!
Kate says
Hi Harry,
I am not sure I understand your answer to Laurel. When I look at my SSA 1099 it shows “Medicare Part B premiums deducted from your benefits”.
Part B is supposed to be tax deductible according to the IRS. It doesn’t seem like it is because Box 5 includes Part B and that is what is used in the calculation. Can you explain? Thanks.
Harry Sit says
To use simple numbers, suppose your Social Security benefit is $2,000 per month and you have $200/month Medicare Part B premium deducted from your benefit. You receive net $1,800 per month deposited into your bank account. When you calculate how much of your Social Security benefit is taxable, use the $2,000/month number and multiply that by the number of months to get the annual Social Security benefits. In other words, add the Medicare Part B premium deducted from your Social Security to your net deposit. That’s your true Social Security benefit.
Unless you’re self-employed, Medicare Part B premium is tax deductible only as a part of medical expenses. Deducting medical expenses requires itemizing deductions and having medical expenses over 7.5% of AGI. Most people can’t deduct their Medicare Part B premium.
Kate says
Thank you . As I worked on my taxes today I realized that it’s not likely that someone could actually deduct Part B even though technically it’s possible.
Your Social Security calculator is brilliant. I worked through the long IRS worksheet but your calculator is so much faster. I used it to do “what ifs” about accepting more income.
I still find it hard to accept that the true Social Security benefit includes Part B but I accept the formula as written. If someone never retired, collected Social Security and was covered under a creditable group health plan at work, Part B would not be deducted.
Bill says
Harry,
Your SSA taxable benefits calculator has been very timely as I contemplate retirement in the next 18 months and look at different non-SSA income scenarios over our early retirement years as my spouse takes early (age 62) SSA benefits and I wait until 70. Several questions for me as I continue to use this to model out “what ifs” during this period:
1) I assume the “tax filing status” choice relates to how large the standard exemption will be. If so, will your calculator be updated as the exemption amount changes each year?
2) Does it assume that each spouse of a joint filing status is 65+, thus an additional exemption amount?
Thanks
Harry Sit says
This calculator only calculates how much of the Social Security benefits is included in the gross income for taxes. Applying the standard deduction and the tax brackets are the next steps to calculate how much taxes you’ll pay. That’s beyond the scope of this calculator.
To use the numbers shown in the calculator example — married filing jointly, $30,000 Social Security benefits, $30,000 interest, dividend, and IRA withdrawals, $3,000 above-the-line deductions — the calculator shows $5,000 of the $30,000 Social Security is taxable. That’s all it does. You take the $5,000 number to calculate the AGI: $5,000 + $30,000 – $3,000 = $32,000. Then you apply the standard or itemized deduction, the special rates on qualified dividends and long-term capital gains, and the tax brackets, etc.
Ron B. says
Harry: How does one calculate SS tax if married filing separately?
Harry Sit says
If the person lived apart from their spouse all year, treat as Single. If the person lived with their spouse for at least one day in the year, use the special procedure in Worksheet 1 in IRS Publication 915, which results in 85% taxable if their other income minus above-the-line deductions is at least 1/2 of the Social Security benefits.
ujean says
hello, i need help with form 915 right now it says that a portion of my social security is taxable but even with the taxable Portion my taxable income is zero. i would like to know that even with the nontaxable income should i worry about doing the lump sum method
Harry Sit says
The purpose of the lump sum method is to lower your taxes by spreading the payment into different years. You don’t need it when your taxable income is already zero without using the lump sum method.