Are Social Security Benefits Taxable?

It depends on the taxpayer’s additional income

Reviewed by Andy SmithFact checked by Katharine BeerReviewed by Andy SmithFact checked by Katharine Beer

You can begin collecting Social Security retirement benefits at age 62, though many people wait to collect larger monthly benefits until they reach full retirement age, which for most people is age 66 or 67. It’s worth noting, however, that age has nothing to do with the amount of tax you’ll pay on your Social Security benefits. The tax is determined by the amount of other taxable income you have.

Key Takeaways

• Social Security benefits may or may not be taxed after 62, depending on your other income earned.
• If you only receive Social Security benefits and no other income, then you likely won’t pay federal income taxes. 
• In 2024, ten states tax Social Security benefits in some manner.

When Benefits Are Taxable

The amount taxed on your Social Security benefits depends on the additional income you bring in. The tax varies from 0% to 85% of your benefits. This means that no matter how much you make, you will receive 15% of your Social Security benefits—unless they are taxed at the state level, in which case you will receive a bit less than 15%.

If Social Security benefits are your sole income and you receive less than $25,000 in annual benefits, your Social Security income is generally not taxable at the federal level. For married couples, the threshold is $32,000.

If you have additional income sources, like tax-exempt interest earnings, a 401(k) plan, or a traditional individual retirement account (IRA), then some of your Social Security benefits may be taxable.

To calculate the tax, you must add your adjusted gross income (AGI) plus nontaxable interest to half of the value of your Social Security benefits. This is the income you’ll use with the table below.

States That Tax Social Security Benefits

In 2024, ten states tax some or all Social Security benefits. These states tax Social Security benefits with varying methods, using AGI or other figures. Colorado revised its tax policy for Social Security benefits in 2023, making them fully deductible for recipients age 65 and older. Here are the states that tax Social Security benefits:

• Connecticut
• Kansas
• Minnesota
• Montana
• Nebraska
• New Mexico
• Rhode Island
• Utah
• Vermont
• West Virginia

Note

New Mexico allows people age 65 and older to take an $8,000 deduction on their taxable income, which may include Social Security benefits.

How Much Tax Do You Pay on Social Security at Age 62?

Taxation by the Internal Revenue Service (IRS) doesn’t depend on your age, or when you claim benefits. Taxation depends on the amount of additional taxable income you receive.

What Are the Disadvantages of Taking Social Security Before Full Retirement Age?

The main disadvantage of taking Social Security benefits before your full retirement age—say, at age 62, instead of at 66 or 67—is that your payment will be permanently smaller. That is, if you wait until your full retirement age to take benefits, your benefits will be 30% larger for the rest of your life. And for each year you wait to claim benefits after your full retirement age, your payment increases by 8%. At age 70, the increases stop.

How Do You Report Social Security When Filing Taxes?

Those who receive Social Security income are sent Form SSA-1099, the Social Security Benefit Statement. This figure will be added to Form 1040, the U.S. Individual Income Tax Return, or Form 1040-SR, the U.S. Tax Return for Seniors. Individuals and married couples report the taxable portion of their benefits depending on other income earned during the year.

The Bottom Line

Social Security taxes don’t depend on age; they depend on income. How much Social Security retirement benefits are subject to federal taxation is unrelated to when you claim benefits, as well. The tax is based on the taxable income individuals or married couples earn. And that’s not all. In addition to federal taxation, ten states tax Social Security benefits in 2024. If you have any questions about your situation, seek out a tax professional.

Read the original article on Investopedia.