Quick Overview
The quick answer is that it depends. Whether or not you have to file a federal tax return if you receive Social Security benefits depends on several factors like your total income, filing status, and the types of income you receive. In some cases, your Social Security benefits may be taxable, requiring you to file a return. However, if your total income falls below the filing thresholds set by the IRS, you may not be required to file. The best course of action is to calculate your total income and review the IRS filing requirements each year to determine if you need to file.
What is Considered Income When Determining Whether You Need to File?
When determining whether you meet the income filing thresholds set by the IRS, you must consider all sources of income. For those receiving Social Security benefits, this includes:
- Social Security benefits (including SSDI benefits)
- Wages from a job
- Retirement income like pensions, annuities, and IRA distributions
- Interest and dividends
- Capital gains
- Rental income
- Prizes and awards
- Unemployment compensation
- Alimony
Even if your only source of income is Social Security benefits, a portion of those benefits may be taxable. You won’t know if this is the case until you calculate your “combined income.”
What is Combined Income?
Combined income is used to determine whether your Social Security benefits will be taxed. It is the total of your adjusted gross income, non-taxable interest, and half of your Social Security benefits.
For example, if you had:
- $10,000 in Social Security benefits
- $5,000 in interest from savings accounts and CDs
- $12,000 in taxable pension payments
Your combined income would be $22,000:
- Adjusted gross income (pension): $12,000
- Non-taxable interest: $5,000
- Half of Social Security benefits: $5,000 ($10,000 x 0.50)
- Combined Income Total: $22,000
This $22,000 in combined income would determine whether your Social Security benefits are taxed.
Are Your Social Security Benefits Taxable?
Whether your Social Security benefits are considered taxable income depends on your combined income and filing status:
| Filing Status | Combined Income Threshold 1 | Combined Income Threshold 2 |
|---|---|---|
| Single filer | $25,000 | $34,000 |
| Married filing jointly | $32,000 | $44,000 |
| Married filing separately | $25,000 | $34,000 |
Based on these thresholds:
- If your combined income is under Threshold 1, your benefits are not taxable.
- If your combined income is between Threshold 1 and 2, up to 50% of your benefits may be taxable.
- If your combined income is above Threshold 2, up to 85% of your benefits may be taxable.
So in the example above with $22,000 in combined income, 85% of the $10,000 in Social Security benefits would be considered taxable income if filing single.
Do You Meet the Filing Requirements?
Once you’ve determined your total income including any taxable Social Security benefits, you can check whether you are required to file a federal tax return.
For the 2022 tax year, the income filing thresholds are:
| Filing Status | Standard Deduction | Must File If Gross Income Exceeds |
|---|---|---|
| Single | $12,950 | $12,950 |
| Married filing jointly | $25,900 | $25,900 |
| Married filing separately | $12,950 | $5 |
| Head of household | $19,400 | $19,400 |
| Qualifying widow(er) | $25,900 | $25,900 |
If your gross income including any taxable Social Security exceeds the “Must File” threshold for your filing status, you generally must file a federal tax return.
For example:
- A single filer has $15,000 in Social Security benefits, $8,000 in taxable pension income, and $3,000 in interest.
- $8,000 + $3,000 = $11,000 in adjusted gross income
- Half of the $15,000 in Social Security is $7,500
- Combined income is $11,000 + $3,000 + $7,500 = $21,500
- This is below the $25,000 Threshold 1, so none of the Social Security is taxable
- Total gross income is $11,000 + $15,000 = $26,000
- This exceeds the single filer standard deduction and filing threshold of $12,950
- Therefore, this person must file a tax return
Other Filing Requirements
Even if your gross income is below the filing thresholds, you may still need to file a return if:
- You had Medicare Part A or B withholdings from your Social Security benefits
- You are eligible for the Earned Income Tax Credit
- You had federal income taxes withheld from your benefits or other income
- You are self-employed and earned $400+ in net earnings
So you should be sure to evaluate your situation carefully each year to determine if you meet any of the requirements for filing.
How to File
If you determine you need to file a tax return, you have several options:
- File online: Use IRS Free File if your adjusted gross income was below $73,000. This provides free access to tax prep software.
- File by mail: You can complete paper forms and mail them to the IRS.
- Get help filing: Work with a tax preparer or utilize the Tax Counseling for the Elderly (TCE) program for free filing assistance.
Be sure to file by April 15 to avoid late filing penalties. If you cannot file on time, file for an automatic six month extension.
Claiming Social Security on Your Tax Return
When completing your tax return, your Social Security benefits will be entered on several forms:
- Form SSA-1099: This form sent by Social Security shows your total benefits paid for the year. Use this to calculate any taxable amount.
- Form 1040: Enter your total benefits on line 6a. Any taxable amount is entered on line 6b.
- Schedule R: If the taxable amount on your 1040 is above certain thresholds, you must also complete this form.
Be sure to have your Form SSA-1099 when filing your taxes to report your benefits accurately.
Taxation of Social Security Benefits
Although up to 85% of your Social Security benefits may be taxable, the good news is that the revenue generated from taxing benefits is returned to the Social Security system. Here is how the tax revenue is allocated:
- 1.45% is directed to the Medicare Hospital Insurance Trust Fund
- 83.45% goes to the Social Security trust funds
- 15.1% goes to the General Fund of the U.S. Treasury
So the taxes paid on your Social Security income help fund Social Security and Medicare to support these programs.
Strategies to Reduce Taxation of Benefits
If your income is near the thresholds where Social Security benefits become taxable, you may want to implement some strategies to try to reduce taxation. Options could include:
- Delaying when you claim Social Security to reduce the amount of benefits
- Withdrawing less from tax-deferred retirement accounts like 401(k)s and IRAs
- Holding off on taking IRA required minimum distributions (RMDs) until age 72 if possible
- Reducing capital gains and dividends that count towards your AGI
- Making deductible contributions to a traditional IRA to reduce AGI
Consulting a tax professional can help identify the best strategies based on your individual financial situation.
Do You Need to Pay Estimated Taxes?
If a portion of your Social Security benefits are taxable, you may need to pay estimated taxes during the year. Otherwise, you could face an underpayment penalty when you file your return.
You typically need to pay estimated taxes if you expect to owe more than $1,000 when you file your tax return. So if you project that your gross income less deductions will result in owing taxes of over $1,000 including taxable Social Security, make estimated payments to the IRS by the quarterly deadlines to avoid a penalty.
Get Help Determining Whether You Need to File
Trying to determine if your Social Security benefits will be taxable and if you meet the filing requirements can be confusing. The best approach is to review your situation each year and get help from a tax professional if needed.
Many free tax prep services are also available if you qualify based on age, income or other factors. For example, the Tax Counseling for the Elderly (TCE) program available through AARP provides free filing assistance for all taxpayers over age 60.
Key Points to Remember
Here are some key points to keep in mind when determining whether you need to file:
- You must file if your gross income including any taxable Social Security exceeds the filing thresholds for your filing status.
- Up to 85% of your Social Security can become taxable based on your combined income.
- Even if your income is low, other requirements like withholding from benefits may obligate you to file.
- Work with a tax preparer or use free services if you need help determining whether to file.
- Pay estimated taxes during the year if needed to avoid underpayment penalties.
Filing taxes on Social Security benefits can be complicated. But taking the time each year to evaluate your situation and understand the requirements can help ensure you meet your filing obligation and don’t miss out on any credits or deductions you may be eligible for.
Conclusion
Whether or not you are required to file a federal tax return in a given year depends primarily on your gross income and filing status. If you receive Social Security benefits, then determining your gross income becomes more complicated, since a portion of benefits may be taxable.
The key steps are:
- Calculate your combined income including adjusted gross income, non-taxable interest, and 50% of benefits
- Use the thresholds to see if any Social Security will be taxed
- Determine your total gross income including taxable benefits
- Check if your gross income exceeds the filing threshold for your status
- See if any other requirements obligate you to file
Consulting the detailed IRS rules each year and getting help from a tax professional when needed can ensure you understand your filing requirement. Paying estimated taxes on any taxable Social Security can help avoid issues. With some diligence, you can make sense of the rules on Social Security benefits and remain tax compliant.