Some people have to pay federal income taxes on their Social Security benefits. This usually happens only if you have other substantial income (such as wages, self-employment, interest, dividends and other taxable income that must be reported on your tax return) in addition to your benefits.

No one pays federal income tax on more than 85 percent of his or her Social Security benefits based on Internal Revenue Service (IRS) rules. Social Security has a sliding scale of taxation depending upon your income. If you file a federal tax return as an "individual" and your “combined income” is between $25,000 and $34,000, you may have to pay income tax on up to 50 % of your benefits.  If your income is more than $34,000, up to 85% of your benefits may be taxable.

If you and your spouse file a joint return, and you have a “combined income” that is between $32,000 and $44,000, you may have to pay income tax on up to 50 % of your benefits. If you and your spouse have a combined income of more than $44,000, up to 85 % of your benefits may be taxable.

“Combined Income” is defined by social security as:

  • your adjusted gross income
  • + nontaxable interest
  • + ½ of your Social Security benefits

Once you start receiving Social Security benefits, whether they are retirement or disability benefits, you will receive a Social Security Benefit Statement (Form SSA-1099) in January, showing the amount of benefits you received in the previous year. You can use this Benefit Statement when you complete your federal income tax return to find out if your benefits are subject to federal income tax.

Social Security Benefits are not subject to state or local income tax.