Surprise Your SSI Might Be Taxed . . .

social-security-benefits

When a taxpayer starts receiving Social Security Benefits sometimes they are surprised to find out that they might have to pay taxes on some of the benefits.  Some taxpayers must include up to 85% of their Social Security benefits in taxable income, while others find that their benefits are not taxable at all.  If Social Security is your only source of income, your benefits probably won’t be taxable.  In fact, you may not even need to file a federal income tax return.  If you get income from other sources, however, you may have to pay taxes on at least a portion of your Social Security benefits.  Your income and filing status will also affect whether you must pay taxes on your Social Security benefits.

A quick way to find out if any of your benefits may be taxable is to add half of your Social Security benefits to all your other income, including any tax-exempt interest.  Next, compare this total to the following base amounts. If your total is more than the base amount for your filing status, then some of your benefits may be taxable. The three base amounts are:

  • $25,000 for single, head of household, qualifying widow or widower with a dependent child, or married individuals filing separately and who did not live with their spouse at any time during      the year.
  • $32,000 for married couples filing jointly.
  • $0 for married persons filing separately who lived together at any time during the year.

To avoid tax time surprises, Social Security recipients can request that federal income tax be withheld from their benefit payments.  Withholding is voluntary and can be initiated by completing IRS Form W-4V (“Voluntary Withholding Request”), requesting to have 7%, 10%, 15%, or 25% (those are the only choices) withheld for federal income tax, and submitting the form to the local Social Security Administration office.  Voluntary withholding can be stopped by completing a new Form W-4V.


2 thoughts on “Surprise Your SSI Might Be Taxed . . .

Leave a comment