Equifax

Finance Blog

Are my Social Security Benefits Taxable?

Written by Eva Rosenberg on June 23, 2014 in Tax  |   No comments

Are my Social Security benefits taxable? That sounds like such a simple question, doesn’t it? The answer should be either “yes” or “no.” But I’m talking about the U.S. Income Tax Code, so of course it’s not that easy. In fact, the correct answer is…

are-my-social-security-benefits-taxableAre my Social Security benefits taxable?

That sounds like such a simple question, doesn’t it? The answer should be either “yes” or “no.”

But I’m talking about the U.S. Income Tax Code, so of course it’s not that easy. In fact, the correct answer is both “yes” and “no.”

First let me make one thing clear: The tax rules are the same for regular Social Security benefits and for Social Security disability benefits, also called Supplemental Security Income (SSI). For simplicity’s sake, I’ll call both types Social Security benefits.

When your Social Security benefits are not taxable

This is relatively simple. As of the 2014 tax year:

  • If you have no other source of taxable income, then no part of your Social Security benefits is taxable.
  • If your total income plus half of your Social Security benefits is below $25,000 (for single people) or $32,000 (for married couples), your Social Security benefits are not taxable.

Your total income includes things that are not normally taxable: non-taxable interest, employer-provided adoption benefits, foreign earned income or foreign housing, and income earned by bona fide residents of American Samoa or Puerto Rico.

When your Social Security benefits are taxable

Once your total income plus half of your Social Security benefits exceeds $25,000 (for single people) or $32,000 (for married couples), you pay tax on up to 85 percent of your benefits. However, if you’re married and filing separately, you lose that $32,000 allowance and 85 percent of your Social Security benefits are immediately taxable.

You don’t pay 85 percent of your benefits as tax, but this amount does get added to your income. That means when you are just one dollar past the previously mentioned dollar limits, your tax rate can skyrocket from 0 percent to 20 percent or otherwise more very quickly.

Test this out in your tax software. Include your normal taxable income and see what your taxes are. Then, add in your Social Security benefits and watch your taxes soar. It’s quite shocking.

You can read more about this and find useful worksheets in IRS Publication 915.

(Read more: How Do I Figure Out My Tax Bracket?)

Taking benefits early

Many people opt to start collecting their Social Security income at age 62, or below their target age. Often, after starting to collect early, they realize they can’t live on the reduced benefits—or they go crazy with boredom—and start to work. This can cause some tax complications.

Your wages or self-employment earnings are limited to $15,480 for the year 2014. For every $2 you earn over that limit, $1 of your Social Security income will be withheld. (You can read this brochure from the Social Security Administration for more information). This means if you work and collect your benefits early, you will increase your taxable income and have to pay back a portion of your Social Security benefits.

Before applying for Social Security benefits, make sure you understand how they work and how they affect your taxes. Consider your life expectancy—if you’re expecting to live into your 80s and 90s, take your benefits later. If you’re only expecting to live until 70, start cashing in as soon as you can.

Whatever you do, focus on enjoying life—today!

No comments yet


Leave a Comment


Name :


Commenting guidelines

We welcome your interest and participation on this forum, but be aware that comments will be published at Equifax's sole discretion. Please don't use this blog to submit questions or concerns about your Equifax credit report or raise customer service issues. Instead, you should contact Equifax directly for all such matters and any attempts to do so in this forum will be promptly re-directed.

Some other factors to consider when commenting:
  1. Registration and privacy. While no registration is required to visit our forum, participants wishing to post a message must register by creating an account. All personal information provided by forum members incident to registration is governed by our Terms of Use and Privacy Policy.
  2. All comments are anonymous. We'll delete your name, e-mail address, and any other identifying information, including details about your investments.
  3. We can't post or respond to every comment - As much as we'd like to, we can't post every comment, nor can we guarantee that we will respond to each individual message. All questions or comments about your Equifax credit report or similar customer service issues should be handled by contacting Equifax directly.
  4. Don't offer specific legal, tax or financial advice. All of the materials on this Site are for information, education, and noncommercial purposes only and this forum is not intended as a means of expressing views or ideas regarding any specific legal, tax, or investment advice. While offering general rules of thumb is both permitted and encouraged, recommending specific ideas or strategies regarding investments, taxes, and related matters is prohibited.
  5. Credit Repair. This blog is not intended as a venue for the discussion or exchange of ideas regarding credit repair or other strategies intended to assist visitors and community members improve or otherwise modify their credit histories, ratings or scores.
  6. Stay on topic. Your comment should be concise and pertain to the specific post in question.
  7. Be respectful of the community. The use of profanity, offensive language, spam, and personal attacks will not be tolerated and egregious or repeat offenders will be banned from future participation. We encourage disagreement and healthy debate, but please refrain from personal attacks on our WordPresss and contributors.
  8. Finally: Participation in this forum may be terminated by Equifax immediately and without notice for failure to comply with any guidelines or Terms of Use. As such, you should familiarize yourself with all pertinent requirements prior to submitting any response through the blog or otherwise. All opinions expressed in this forum are solely those of the individual submitting the comment, and don't necessarily represent the views of Equifax or its management.

Equifax maintains this interactive forum for education and information purposes in order to allow individuals to share their relevant knowledge and opinions with other members and visitors. We encourage you to participate in discussions about personal finance issues and other topics of interest to this community, but please read our commenting guidelines first. Equifax reserves the right to monitor postings to the forum and comments will be published at our discretion. Do you have questions or comments about your Equifax credit report or customer-service issues regarding an Equifax product? If so, please contact Equifax directly. All opinions and information expressed or shared in blog comments are solely those of the person submitting the comments, and don't necessarily represent the views of Equifax or its management.


Tax Archive

Stay Informed Sign up for our FREE Equifax email Newsletter