Did you register to receive social security benefits last year? If so, you may have questions about how that income is taxed on your federal income tax return.
Here’s the bright side. The formula remains the same as prior years. Unfortunately, the thresholds for determining taxability are not adjusted for inflation, and did not change either. Those thresholds, or “base amounts,” remain at $32,000 when you’re married and file a joint return, and $25,000 when you’re single.
What portion of your social security benefit is taxable? To find the answer, calculate your “provisional income.” That’s your adjusted gross income plus tax-exempt interest, certain other exclusions, and one-half of the social security benefits you received.
If your tax-filing status is “married filing jointly,” your benefits are 50% taxable if your provisional income is between $32,000 and $44,000. If your provisional income is greater than $44,000, up to 85% of your benefits may be taxable. The 50% taxability range for those with “single” filing status is $25,000 to $34,000.
In some circumstances, diversifying the varieties of other retirement income you receive can lessen
the tax burden on your social security benefits.
Contact us if you would like more information or planning assistance.