Taxes on Social Security Benefits

It is tough to escape the tax net as it is quite intricately formulated by the state. Even if one is availing social security benefits, taxes are still imposed under certain conditions.

It is not at all true that all people availing social security benefits need not pay taxes. Under certain specific conditions, taxes levied on these benefits are exempted but if the income exceeds a preset limit, the benefits are indeed taxed. As of 2010, about 34% of people, who are availing these benefits, pay taxes. In the following lines, I present information about the exact rules regarding imposition of taxes on benefits offered by social security welfare programs.

What is Taxable Income For Social Security Beneficiaries?

One needs to understand what is considered as taxable income for social security beneficiaries. It is the AGI (Adjusted Gross Income) of the beneficiaries plus one half of the social security benefits, along with non-taxable interest money received. The sum of all these income components is called the 'Combined Income'. To know what are taxes imposed on these benefits, you need to calculate what is your combined income from all the above mentioned sources.

Federal Taxes on Social Security Benefits

The amount of taxes imposed on social security benefits is entirely decided by the combined income of an individual. Naturally, people who are availing benefits, need to know the related tax structure and their exact combined income amount. Just like all other laws of taxation, the laws related to federal tax on social security benefits are different for individuals and couples filing taxes. Just like all other taxes, the taxation limits are different for individuals and married couples. In the following lines, we will talk about the exact taxation thresholds for people who are beneficiaries of social security welfare support. It will also be applicable to taxes on social security death benefits.

Benefits For Individuals
First let us talk about taxes for individuals. The rules apply to people who receive benefits under various categories. It also applies to taxes on social security disability benefits. If an individual availing benefits, has an income in excess of $34,000, then by law, 85% of the money he receives as benefits is taxable. On the other hand, if the individual's income falls between $25,000 and $34,000, half of his benefit money is considered taxable in that financial year.

This means, individual social security beneficiaries, whose income is below $25,000 will pay no taxes. This also applies to taxes on death and retirement benefits.

Benefits For Married Couples
Now that we have considered individuals, let us have a look at the taxation slabs for married couples. If any married couple, availing social security benefits has an additional combined income in excess of $44,000, then exactly 85% of their social security benefit money is taxable. If their combined income falls within the range from $32,000 to $44,000, half or 50% of the benefits are taxable. If a couple has a combined income below $32,000, then their benefits are not taxed.

If you consider the above taxation limits on social security, you will realize that they have been set quite high. It is unlikely that the majority of people who avail these benefits will have an income that exceeds these limits. Visit the Internal Revenue Service (IRS) website for the latest updates.