If you are earning income in ways additional to the Social Security benefits that you collect, you may be legally liable to pay taxes on the benefits. Even if you continue to collect interest or dividends, or earn wages through self-employment, no one is responsible for paying tax on more than 85% of their Social Security benefits.
A factor that weighs heavily on how large a portion of your Social Security benefits are taxed is your combined income. To calculate your combined income, simply take your adjusted gross income, add your nontaxable interest and then add ½ of your Social Security benefits. Each year, the IRS sends out documents wherein you can locate these figures.
The breakdown of Federal Tax on Social Security Benefits goes as follows:
1. If you file your federal tax return as an INDIVIDUAL and your combined income is:
- Between $25,000 – $34,000, you may be taxed on up to 50% of your benefits
- Above $34,000, you may be taxed on up to 85% of your benefits
2. If you file a JOINT federal tax return, and you and your spouse’s combined income is:
- Between $32,000 – $44,000, you may be taxed on up to 50% of your benefits
- Above $44,000, you may be taxed on up to 85% of your benefits
Additionally, if you are married but you and your spouse file separate tax returns, you will likely pay taxes on your Social Security benefits. When paying taxes on your Social Security, you can either schedule payments or opt to have a portion of your wages withheld.
Contact Kaplan Lawyers PC
If you’ve got any questions at all concerning your Social Security benefits, don’t hesitate to contact Kaplan Lawyers PC for a free consultation. We can help evaluate your situation, help you obtain and complete relevant paperwork, and clear up any misunderstandings you may have about what you owe and what you’re due. The federal tax system can be a complex and confusing thing to understand, but at Kaplan Lawyers PC we are here to help.