Is Social Security income taxed? Well, yes and no. It all depends on how much yearly combined income you actually have. The average Social Security benefit at the start of 2012 for a retired worker was around $15,000 a year. If you are part of the average and Social Security is your only source of retirement income, then you would not be required to pay any taxes on that income.
In order to figure out if your Social Security is taxable, you need to calculate your combined income, which is your adjusted gross income plus non-taxable interest plus half of your Social Security Benefit. Then figure out where you fit in below:
- If your combined income for single filers is less than $25,000 or $32,000 of joint filers, then your Social Security income is not taxed
- If your combined income for single filers is between $25,000 and $34,000 or between $32,000 and $44,000 for joint filers, then you have to pay tax on up to 50% of your Social Security benefit
- If your combined income for single filers is over $34,000 or over $44,000 for joint filers, then you have to pay tax on up to 85% of your Social Security benefit
Your Social Security income will never be 100% taxable. Make sure you diversify your retirement income and consider all options to reduce your tax liability. We recommend you consult your financial advisor or tax professional with any specific questions on how your retirement income is taxed. If you don’t have one, we would be happy to recommend one in your local area. Give us a call at Annuity Think Tank at (888) 282-3653 or email us at firstname.lastname@example.org. We would welcome the opportunity to speak with you!