Do I have to pay taxes on Social Security benefits? How much?
Many on Social security are wondering if their benefits are taxable. While many won;t be, there is an earnings threshold that could mean you paying tax.
Some people will need to pay federal income tax on Social Security benefits. There is a limit of your combined income, and those with a combined income under $25,000 ($32,000 for married couples) a year will not have to pay taxes on their Social Security benefits.
However, for individuals and married couples earning above this threshold you will more than likely have to pay some tax.
For those with a combined income between $25,000 and $34,000 ($32,000 to $44,000 for married couples) a year, the Social Security Administration may be able to levy tax upon fifty percent of your benefits. Finally, with an income over $34,000 ($44,000 for married couples), one can be taxed up to eighty-five percent of their Social Security benefits.
Also, if you are married and file seperate returns then you will probably pay taxes on your benefits.
How can I calculate my combined income?
There is a fairly simple equation for working out your combined income, and therefore whether you will have to pay taxes.
How will I know that I have to pay?
The Social Security Administration (SSA) will send a benefit statement each year in January to beneficiaries called Form SSA-1099. This form shows the total amount of benefits you received from Social Security in the previous year. With it, you will be able to “complete your federal income tax return to find out if your benefits are subject to tax.”
Additionally the SSA also allows beneficiaries to report their incomes quarterly to avoid a surprise at the end of the year. Another option includes having the agency withhold the taxes that would be owed when distributing your monthly payments. In order for the taxes on the benefits to be withheld you will need to submit a Form W-4V to the IRS.