John Burns

Taxing Social Security Benefits

The Government Giveth, and the IRS Taketh Away.  

I can practically set my watch by it.  Every year about this time, I get the same basic call which goes something like this: “I’m down here at the accountant’s office, and he is telling me that I have to pay tax on my Social Security benefits.  That just can’t be right.”  This year, that call arrived at 2:19 today.

Once upon a time, Social Security benefits were not subject to federal income tax.  All of that changed in 1983 when the IRS started taxing up to 85% of Social Security benefits.  The taxability of Social Security benefits depends on one’s provisional income.  To compute one’s provisional income, take your modified adjusted gross income add one-half of your Social Security benefits and add all of your tax exempt interest.

For 2017 taxes:

  1. If provisional income is less than $32,000 for a married couple or $25,000 for a single, you’ve hit the Social Security jackpot and there is no tax on the Social Security benefits;
  2. If provisional income is more than $32,000 but less than $44,000 for married couples ($25,000+ to $34,000 for singles), up to fifty percent (50%) of Social Security benefits are subject to federal income tax.
  3. Finally, if provisional income exceeds $44,000 for marrieds ($34,000 +) for singles, then up to 85% of Social Security benefits are subject to federal tax .

And if you do not want to compute this yourself, both the IRS and the Motley Fool have good online calculators.


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