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Social security is sometimes taxable and in some cases it is not taxable. Broadly speaking, the term social security implies Federal Old-Age, Survivors and Disability Insurance program (OASDI), a program that has been initiated by the Social Security Act of 1935, and is governed by the Social Security Administration. There are 7 programs that are included in the social security domain. Namely, Federal Old-Age (Retirement), Survivors, and Disability Insurance, Unemployment benefits, Temporary Assistance for Needy Families, Health Insurance for Aged and Disabled (Medicare), Grants to States for Medical Assistance Programs (Medicaid), Grants to States for Medical Assistance Programs (Medicaid) and Supplemental Security Income (SSI). The contributions and funding are granted by the payroll taxes which are collected, through employers as per the provisions of Federal Insurance Contributions Act. There are social security benefits and many different tax implications of social security which are stated by the IRS. In theory, It is true that social security is taxable, but there are certain terms and conditions that become party to the same. Finding out about them would be helpful in the long run.

Social Security in US

According to the compliance of the Federal Insurance Contributions Act tax, the administration collects funds for these schemes though payroll taxes from the employees. These funds are then in turn used to provide the 'received social security' or rather the benefits which are simply referred to as 'social security benefits'. Some of the common benefits include, benefits for old-age, survivors and disability insurance. Social security and Medicare benefits are for all contributors and after retirement almost all members get the benefit.

IRS Guidelines on Taxability

Title 26, Subtitle C, Chapter 21, carries all the different provisions that are related to the social security and the benefits provided thereof. The Internal Revenue Service that is the IRS, has stated some conditions regarding the tax provisions, exemption and tax imposition on the benefits of social security. Here is an answer to the query 'is social security disability income taxable'. Note that all resources regarding the taxes on social security benefits are stated by the IRS and are subject to change. Hence confirm all your rates, limits and facts while filing the return.

Taxation of social security benefits depends on 2 things, namely, the total income of the person and the base amount. More instructions regarding the tax applicability on your social security benefits follow, however, it is important to take a look at all the base amounts as they differ from case to case. A base amount disclosed by the IRS may differ from year to year. Current base amounts go as follows:
  • $25,000: Single and head of household, widow or widower.
  • $25,000: Married but filing separately, living separately.
  • $32,000: Married and filing jointly.
  • Nil: Married filing separately and living together.
  • Another margin known as the additional amount is also imposed by the IRS, which is $34,000 for all categories except, $44,000, for people who are married and filing jointly.
Firstly, determine your Provisional Income. The provisional consists of all your income, plus tax exempt income, plus one half of the social security benefits that you have received. In cases where your provisional income is below the base amounts aforementioned, your entire social security benefits go non taxable. If the provisional amount turns out to be more than the base amounts and additional amounts then half of the benefits are taxed. If the provisional amount exceeds the additional amount then $4,500 plus 85% worth of social security benefits are taxed. In cases if you are married and filing jointly, then $6,000 plus 85% of the amount comes into the income tax scanner.

IRS Publication 915 provides an entire overview of the norms and laws. Form 1040, Form 1040 A and Form 1040 EZ are used to report the said benefits and incomes. The SSA and SSB issue, SSA-1099, SSA-1042S, RRB-1099 and RRB-1042S to report the social security benefit that is paid on a yearly basis. A detailed knowledge of the above is very important to understand fully how social security laws work and also when it is taxable and when not.