Are Social Security Benefits Taxed?

March 12, 2019
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In short, yes. However, the degree to which they are taxed varies by income. This is different from your paycheck, where for everyone, the entire pay minus deductions are subject to taxes of some sort. The term for the portion of your Social Security subject to taxes is called provisional income. Provisional income is sum of your adjusted gross income, your tax-exempt income, and one half your Social Security benefits, excluding any foreign income.

There are three thresholds to consider –

  1. Less than $32,000 ($25,000 for single), 0% of your Social Security was taxable
  2. Between $32,000-$44,000 ($25,000-$34,000 for single), up to 50% was taxable
  3. Over $44,000, 85% was taxable

Because of this, financial planning should be done around these thresholds. While you may not expect to have income in this range, during the first few years of retirement, it’s not uncommon to only live off Social Security and after-tax savings, which if managed efficiently, can result in fewer taxes.

Disclaimer: Alex Voorhees and Reston Wealth Management do not provide legal, accounting or tax advice. This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor. Every individual situation is unique and a proper plan should be put in place before making a decision regarding Social Security. The Social Security Administration alone makes all final determinations on your eligibility for benefits and the benefit amounts.  You should consult with your local Social Security Office before acting upon any information provided.  The opinions voiced in this article are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. No strategy assures success or protects against loss.