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Is your social security income taxable? A complete guide

Are you worried about your social security income? If yes, you are among those who don’t know whether social security income is taxable. However, the shortest answer to this question is Yes. Social security income is taxable, and many people are surprised after listening to this. There are different types of payments like pensions, retirement funds, part-time work, or self-employment income. However, if so, wide varieties exist, and it’s hard to keep track of each. So, we will learn about social security income.

Is my social security income taxable?

Usually, social security income is taxable at the federal level. But the taxes on the social security benefits depend on the income range. For instance, if you have more than one income source like retirement funds or pension plans, you will have to pay taxes on social security benefits. It’s recommended to take a financial advisor’s help to understand different taxable income types. Generally, the federal government taxes up to 85% of social security income, and it happens if they earn more than a specific limit. Besides, here are the following other conditions that make the income taxable:

If the income is between $25,000-$32000, then the taxable ratio is 50% of the social security benefit.
If combined income exceeds $34,000, 85% of social security income is taxable.
A married couple’s income is around $32,000-$44,000; then, they will have to pay 50% as tax.
If the combined income of a married couple is more than $44,000, then the taxable ratio is 85%

But, if social security is your only source of income, then you don’t need to pay taxes. The average payment was $1657 for retired people and $2753 for married couples below the taxable bracket. Moreover, you also have the option of using different strategies to minimize the social security taxable income.

How does the IRS calculate social security tax?

The taxation of social security started in 1983, and since then, the limits didn’t change. However, here is the guideline that will tell how IRS calculates taxable income:

  • The IRS starts the calculation with the adjusted gross income you earned from social security and all other sources. However, the AGI includes wages, self-employment earnings, interest, dividends, and income from retirement accounts. In the case of self-employment earning, you can take the help of paystubs generator to keep track of your income.
  • In the second step, the IRS adds the tax-exempt interest. The tax-exempt interest isn’t taxed but used during the calculation.
  • So, if the income exceeds the minimum taxable level, half of your SSB will be considered taxable.

However, after completing all these steps, the IRS deducts essential items to determine the net income. The amount that you will have to pay depends on the taxable bracket where your net income lands.

How can we minimize social security benefit taxes?

Earlier, we have discussed that social security taxes have been the same since 1983. But you can avoid these taxes by lowering the adjusted gross income. However, here are a few tricks that you can use to reduce the adjusted gross income:

Show less income from your business

The first way to reduce the taxes on social security income is by lowering the payment you receive from the business. So, if you are receiving a partnership or any other amount, look for ways to minimize it. According to the Crane:

“You can reduce the income by increasing expenses or business deductions.”

But you can’t apply this strategy every year; that’s why you can use this strategy in alternate years. In this way, you will not have to pay taxes every year.

Withdraw less money from retirement plans

Many people love investing in a retirement savings account and withdrawing money in monthly installments. But the money you make from the 401K retirement plan considers income and comes under the gross income category. However, if you don’t withdraw money, it will help minimize the taxable income. Instead, you can make money from IRA and 401K plans separately to avoid taxable income.

Donate the amount to charity

Additionally, you can minimize the taxable income by giving to charity. You can write off the charity as an expense from adjustable gross income. But if you want to pay directly from the IRA to charity, you must be eligible for the charitable distribution rule. However, it is among the best strategies recommended by top advisors to minimize the taxable social security income.

Keep amount in Roth accounts

There are many high-income skills, and people earn by using those skills. But there is no point in making it if you don’t know how to manage money and tax efficiently. So, if you don’t want to increase social security taxable income, then contribute to Roth IRA and Roth 401K plan. If you withdraw money from the Roth IRA, they aren’t taxable. But here are a few conditions to qualify for this:

  • You must be 59.5 years old.
  • Your account should be five or more years old.

However, the payouts from Roth IRA don’t affect taxable income, nor can we include them in the amount you owe to pay against social security benefits. But if you take the amount from the traditional IRA and traditional 401K plan account, then that is taxable.


The above guide proves that social security benefits are taxable. But there are many ways to minimize the adjustable gross income. But it’s vital to mention here that if you are living in the USA, then:

  • 38 states don’t impose taxes on social security benefits
  • The other 12 states imply taxes under certain conditions

Thus, if you want to save more money, plan well in advance; otherwise, taxes will take a big chunk of your income. Thus, plan carefully to minimize the overall tax burden.

The founder and CEO at ThriveVerge, The Verge, and Thrive Revolution. He launched Thriveverge in 2016, a leading behavior change technology, business, media, and entertainment company with the mission of ending the collective delusion that burning out is the price we have to pay for success.


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