How To Calculate Your Social Security Benefit Taxes

You probably are aware that a portion of your Social Security retirement benefit may be taxable.  Do you know how the tax is calculated?  Or how the taxable portion of your benefit is determined?

The Rules

There are a couple of different levels of income that determine how much of your Social Security Benefit is taxed.  The first level is $32,000 for a married couple filing jointly (MFJ) or $25,000 for single, head of household and qualifying widow(er) filing statuses.  If your Modified Adjusted Gross Income (MAGI) plus half of your Social Security benefit is less than this first level for your filing status, none of your Social Security benefit is taxable.

The second level is $44,000 for MFJ or $34,000 for the single filing statuses.  If your MAGI plus half of your Social Security benefit is greater than the first level but less than the second level, then as much as 50% of your Social Security benefit may be included in your taxable income.

If your MAGI is above the second level, then as much as 85% of your Social Security benefit may be included in your taxable income.

Like most calculations in the tax code or where Social Security is involved, it’s a mess to understand.  I’ll give you some examples below to illustrate how this works.

A Few Examples

Example 1.

Married Filing Jointly, MAGI = $15,000; SS = $15,000

1. MAGI $15,000
2. Half of SS Benefit $7,500
3. Provisional Income (PI) line 1 plus line 2 $22,500
4. First Level $32,000
5. Subtract line 4 from 3 – if less than zero, enter zero and stop.  No tax on SS Benefit $0

Since the PI is less than the First Level, none of the SS benefit is taxed.

Example 2.

Married Filing Jointly, MAGI = $25,000; SS = $20,000

1. MAGI $25,000
2. Half of SS Benefit $10,000
3. Provisional Income (PI) line 1 plus line 2 $35,000
4. First Level $32,000
5. Subtract line 4 from line 3 $3,000
6. Multiply 50% Level by .5 $1,500
7. Second Level $44,000
8. Subtract line 7 from line 5 – if less than zero, enter zero and stop.  Line 6 is added to your income as taxable $0

Since the 50% level amount is greater than zero, half of the amount above the 50% level will be added to the taxable income for the couple.  None of the benefit is includable at the 85% rate.

Example 3.

Married Filing Jointly; MAGI = $45,000; SS = $20,000
1. MAGI $45,000
2. Half of SS Benefit $10,000
3. Provisional Income (PI) line 1 plus line 2 $55,000
4. First Level $32,000
5. Subtract 1st from PI (50% level) $23,000
6. Multiply 50% Level by .5 – if more than $6,000, enter $6,000 $6,000
7. Second Level $44,000
8. Subtract line 7 from line 3 $11,000
9. Multiply line 8 by .85 $9,350
10. Add line 6 and line 9 $15,350
11. Multiply line 2 by 1.70 $17,000
12. Lesser of line 10 or line 11 is added to your income as taxable $15,350

Since the SS benefit was greater than the upper limit, a portion of the benefit is included at the 50% rate, and another portion is included at the 85% rate, for a total addition of $15,350 to taxable income for the couple.

Example 4.

Married Filing Jointly;

MAGI = $55,000; SS = $20,000

1. MAGI $55,000
2. Half of SS Benefit $10,000
3. Provisional Income (PI) line 1 plus line 2 $65,000
4. First Level $32,000
5. Subtract 1st from PI (50% level) $33,000
6. Multiply 50% Level by .5 – if more than $6,000, enter $6,000 $6,000
7. Second Level $44,000
8. Subtract line 7 from line 3 $21,000
9. Multiply line 8 by .85 $17,850
10. Add line 6 and line 9 $23,850
11. Multiply line 2 by 1.70 $17,000
12. Lesser of line 10 or line 11 is added to your income as taxable $17,000

Since the PI was greater than the 85% level, we did the same type of calculation as in Example 3, except that this time the total of the 50% taxed amount and the 85% taxed amount was greater than 85% of the overall SS benefit, so only that amount is added to the taxable income for the couple.

Hopefully these examples will help you to better understand how the amount of taxable Social Security benefit is calculated for various situations.

About the author

Jim Blankenship, CFP®, EA

Jim Blankenship is the founder and principal of Blankenship Financial Planning, Ltd., a financial planning firm providing hourly, as-needed financial planning and advice. A financial services professional for over 25 years, Jim is a CFP professional and has earned the Enrolled Agent designation, a designation that qualifies him as enrolled to practice before the IRS. Jim is also a NAPFA-registered financial advisor, which designates him as a Fee-Only Financial Advisor.

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  • Steve,

    Your wife cannot collect the spousal benefit alone since she’s less than FRA. Once she reaches FRA she can collect the spousal benefit only and continue to delay her own benefit. She could also File and Suspend at FRA which would potentially allow you to receive a spousal benefit as well (if your own PIA is less than half of her PIA, or if you have not filed yet). But you can’t both receive spousal benefits at the same time.

    Hope this helps –

    jb

  • Jim,

    I am currently 62 years old and have not yet applied for social security. My wife is 60 years old and her lifetime earnings result in a slightly higher amount than mine based on her 35 years highest wages. If I collect social security prior to age 66 (my FRA) can my wife collect spousal benefits instead of her own social security benefit amount, and then switch to her own higher amount later on? Or do I have to be FRA in order for her to do this? Or will social security not allow her the option of collecting spousal benefits since her social security amount would be much higher than her spousal benefits? I am trying to think of a legitimate way that she can at least collect something as a spouse while letting her own benefit amount continue to grow. Appreciate your advice. Thanks Jim.

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