Thursday, September 20, 2012

Is Social Security Income Taxable?

It all depends. If the individual or jointly-filing couple received no additional income, taxable or tax-exempt, the social security income is not taxed. If, however, the combination of (1) half of social security income, (2) tax exempt income, and (3) wages, interest, dividends, alimony, etc. exceed total social security income without being offset by adjustments, the individual or couple will pay taxes on a portion of the social security earnings.

The form for calculating what portion, if any, of the social security income is taxable is on Page 26 of the 2011 Form 1040. I’ve automated the calculations involved on a spreadsheet. It turns out that if the filer’s total income from other sources is at or below 75 percent of SS income, net of any adjustments or deductions, SS is exempted. Thereafter, a portion of the SS income is taxed, up to a maximum of 85 percent of it.

The instruction booklet is available from About.com (link).

1 comment:

  1. I don't see why it would not. it is taken out pretax, just like a 401K

    When you pull it out of the 401K, you get taxed on what you pull out.

    Given the max benefit from SS is 30K per year, I can't see it rising to the level of being Federally taxed.

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