As the tax filing date rapidly approaches new Social Security beneficiaries might be wondering if they are required to pay taxes on their benefits. Although the answer is not quite cut and dry, usually you will not have to pay taxes on your benefits unless you have other sources of income that move you into taxable thresholds.
Adding your Social Security income to your tax return is relatively painless as Social Security issues Form SSA – 1099/1042S which indicates exactly what Social Security paid you for the previous year.
If you file an individual tax return and your annual income, including Social Security benefits, is between $25,000 and $34,000 you may have to pay taxes on up to 50 percent of your Social Security benefits. If your income is more than $34,000 you may have to pay taxes on up to 85 percent of your Social Security benefits. Internal Revenue Service (IRS) rules prevent everyone from paying taxes on 100 percent of their Social Security benefits.
If you file a joint return and annual income is between $32,000 and $44,000 you may have to pay tax on up to 50 percent of your benefits and up to 85 percent on those joint filers earning more than $44,000.
As we indicated earlier most people whose only source of income comes from Social Security benefits will not have to pay taxes. According to Social Security, the average monthly benefit as of January 2016 was $1,341 per month, which equals a little more than $16,000 annually, almost $9,000 below the taxable threshold for an individual taxpayer. Even someone who receives the maximum possible Social Security benefit of $2,639 per month only earns $31,668 per year, which would only be subjected to tax on 50 percent of this amount. To learn more about taxes and Social Security benefits click here.
