Social Security took in more than $1.35 trillion in 2023. The bulk of that came from the income taxes workers paid, but seniors made their contribution too. They paid a combined $50.7 billion in Social Security benefit taxes, and all signs point to that figure being even higher in 2024.
If you're claiming benefits this year, you don't want to wait until tax time to find out if you owe the government a cut of your checks. Here's what you need to know about Social Security benefit taxes so you can prepare ahead of time.
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Who pays Social Security benefit taxes?
The federal government bases Social Security benefit taxes on your provisional, or combined, income. This consists of three factors:
- Your adjusted gross income (AGI): This is your gross annual income, minus certain tax breaks.
- Nontaxable interest: You may have nontaxable interest if you own any municipal bonds.
- Half your annual Social Security benefit: If you receive $20,000 in Social Security benefits per year, then you'd count half, or $10,000.
The taxable portion of your Social Security benefit also depends on your marital status. The following table shows how much of your checks the federal government could tax based on your provisional income:
|
Marital Status |
0% of Benefits Taxable if Provisional Income Is Under: |
Up to 50% of Benefits Taxable if Provisional Income Is Between: |
Up to 85% of Benefits Taxable if Provisional Income Exceeds: |
|---|---|---|---|
|
Single |
$25,000 |
$25,000 and $34,000 |
$34,000 |
|
Married |
$32,000 |
$32,000 and $44,000 |
$44,000 |
Data source: Social Security Administration.
To clarify, if up to 50% of your benefits are taxable, that doesn't mean you'll have to give half your annual benefit back to the government. It means you'll pay ordinary income tax on up to half your benefit. Income tax brackets range from 10% to 37%, with most people falling toward the lower end of this range.
Why more seniors are paying Social Security benefit taxes
The government set the thresholds for Social Security benefit taxation listed in the table above in 1983 and hasn't updated them since. This is problematic for seniors because average Social Security benefits rise over time.
Larger average benefits increase the likelihood of seniors owing Social Security benefit taxes, and that's what we're seeing. Here's a look at how income from these taxes has increased over the past several years:
|
Year |
Income From Social Security Benefit Taxes |
|---|---|
|
2021 |
$37.6 billion |
|
2022 |
$48.6 billion |
|
2023 |
$50.7 billion |
Data source: Social Security Trustees Reports.
If this trend continues, more seniors will find themselves paying these taxes in 2024. Some might be able to avoid it, though, with careful planning. If you have a lot of Roth savings, for example, you might be able to rely upon those once you near the thresholds outlined above to avoid pushing your provisional income into the taxable range. But that won't work for everyone.
How to prepare for Social Security benefit taxes
If you believe you'll owe Social Security benefit taxes this year, don't forget to budget for them. You may want to consult a tax professional if you're not sure how much you could owe.
Those who don't want a big bill at the end of the year can request that the government withhold money for taxes from their Social Security checks upfront. You just have to fill out a form. Contact the Social Security Administration if you have any questions about this or Social Security benefit taxes in general.
One additional note: 10 states tax the Social Security benefits of some of their seniors. If you live in one of them, you could lose even more of your checks. Check with your state government to learn who owes these taxes and what tax rate you'll pay on your benefits so you can prepare yourself.
