Are My Social Security Benefits Taxable?

In order to determine if any part of your Social Security benefits are subject to tax, you need to recalculate your adjusted gross income (AGI), including any non-taxable interest or dividends, plus HALF of your Social Security benefits (as reported on Form SSA-1099, Box 5). Let's call this your Social Security AGI (or SSAGI).

At least some part of your Social Security benefits will be taxable if your SS-AGI exceeds the following:

$25,000 if you are unmarried
$32,000 if you are married, filing jointly
$25,000 if married, filing separately AND lived apart from your spouse the entire year
$-0- if married, filing separately and you lived with your spouse for any part of the year.

How much will be taxable? That depends by how much your SS-AGI exceeds those limits. To the extent that your SSAGI is over the amount above, but less than the "second tier" limit ($34,000 for unmarried, $44,000 for married/joint, $25,000 for married/separate/lived apart all year, or $-0- again for married/separate/did not live apart), you pay tax on the lower of half of your benefits, or the amount by which SSAGI is over the first group of numbers above. To the extent that your SSAGI exceeds the "second tier" limits in this paragraph, 85% of your benefits are taxable.

Confusing? If your SSAGI is over the amounts shown, you need to use the worksheet for this, which is provided in the instructions for the Form 1040 or Form 1040A. The worksheet is a long one, but it is easier to follow than the rules in narrative form, as they are here.

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Tax Disclaimer: To ensure compliance with IRS Rules, any U.S. federal tax advice provided in this communication is not intended or written to be used, and it cannot be used by the recipient or any other taxpayer (i) for the purpose of avoiding tax penalties that may be imposed on the recipient or any other taxpayer under the Internal Revenue Code, or (ii) in promoting, marketing or recommending to another party a partnership or other entity, investment plan, arrangement or other transaction addressed herein.