The Social Security retirement benefits you get may be considerably more than the Internal Revenue Service minimum income for filing a tax return. Yet for many retirees, none of their benefits count as income, so filing is not required. But that’s not always the case, so you should understand part of Social Security counts as income for a retired person.
If your only income comes from Social Security, then those earnings do not count as income for tax purposes. However, if you have a job or earn income from another source, some of your Social Security may be taxable since the IRS includes it in your combined income.
Social Security as Sole Income
When your retirement income is limited to Social Security, the benefits do not count for tax purposes, and you do not have to file a tax return, according to the IRS. If you do have additional income that exceeds IRS limits, you may be required to count part of your Social Security benefits as income. If so, you have to file a tax return and report Social Security benefits. When your other income is below the IRS threshold amounts, you might still have to file a tax return based on the amount of your gross income, but you don’t include your Social Security benefits.
What Income Does Count
When you are determining if some of your Social Security is taxable, the other income you count includes wages, tips and other compensation. Add taxable self-employment and investment earnings. Include taxable distributions from retirement plans such as a 401(k) or traditional IRA, but not nontaxable distributions from a Roth IRA.
Qualified U.S. savings bond interest and tax-exempt interest also count for Social Security purposes. Include any foreign income, including housing and income as a resident of American Samoa or Puerto Rico.
Taxable Social Security Benefits
To see if some of your Social Security may be taxable, the IRS suggests the following test. Add up all of your other income as described above. To this amount, add one-half of your annual Social Security benefits. For married taxpayers who file a joint return, you must count part of your Social Security when the total exceeds $32,000. For single taxpayers and other filing statuses, the threshold is $25,000.
There is one exception. If you are married, file a separate return and you lived with your spouse for any part of the year, the threshold is zero, so you will likely pay taxes on your benefits.
Knowing Your Taxable Percentage
Not all of your Social Security counts as income for tax purposes when your income level exceeds the IRS limits discussed above. You have to report at least 50 percent of your Social Security benefits, and you may have to pay income taxes on them. If your income exceeds $44,000 and you are married and filing jointly, 85 percent of your benefits may be taxable. For all other filing statuses, the 85 percent rule applies when your income is over $34,000. If you are married, file a separate return, and lived with your spouse for any part of the year, the threshold is zero.
Based in Atlanta, Georgia, W D Adkins has been writing professionally since 2008. He writes about business, personal finance and careers. Adkins holds master's degrees in history and sociology from Georgia State University. He became a member of the Society of Professional Journalists in 2009.