Millions of Americans rely on Social Security during retirement—but are those benefits tax-free? Not exactly. Depending on your total income, up to 85% of your benefits may be subject to federal and even state taxes. Here’s how to find out where you stand.
Each month, nearly 68 million Americans receive Social Security benefits—most of them retirees. For many, these monthly payments are a primary source of income, averaging about $1,918 as of 2024. But when tax season rolls around, many beneficiaries are surprised to learn that Social Security income isn’t always tax-free.
What Is Social Security?
Social Security is a federal program designed to provide financial support at various stages of life. It offers retirement income, disability assistance through Social Security Disability Insurance (SSDI), and survivor benefits for spouses and children of deceased workers.
Funded through payroll taxes collected from both employees and employers, Social Security is a safety net that most working Americans pay into during their careers—and eventually draw from in retirement or other times of need.
Is Social Security Income Taxable?
Yes—Social Security benefits can be taxed by the federal government. Whether you actually owe taxes depends on your combined income for the year, which includes:
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One-half of your annual Social Security benefits
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Any other taxable income (such as wages, interest, or dividends)
Here’s how the IRS defines the income thresholds for taxation:
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Individuals with a combined income over $25,000 may owe taxes
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Married couples filing jointly with a combined income over $32,000 may owe taxes
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Married individuals filing separately are likely to owe taxes regardless of income
How Much of My Benefits Are Taxed?
The percentage of your benefits that are taxable depends on how far your income exceeds those thresholds:
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Up to 50% of your benefits may be taxed if:
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You’re single and earn between $25,000 and $34,000
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You’re married filing jointly and earn between $32,000 and $44,000
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Up to 85% of your benefits may be taxed if:
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You’re single and earn more than $34,000
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You’re married filing jointly and earn more than $44,000
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Do States Tax Social Security Too?
In addition to federal taxes, some states also impose taxes on Social Security income. As of 2024, nine states tax benefits to varying degrees:
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Colorado
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Connecticut
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Kansas
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Montana
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New Mexico
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Rhode Island
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Utah
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Vermont
Other states may exempt Social Security income completely or offer partial exclusions based on age and income.
Final Thoughts
If you’re approaching retirement—or already collecting benefits—it’s crucial to understand how taxes may impact your take-home income. While not all recipients will owe taxes, many do, especially those with additional retirement income from pensions, investments, or part-time work.
To avoid surprises come tax season, consider working with a tax professional and reviewing your estimated benefit amounts each year. A little planning now can ensure you keep more of your hard-earned retirement income.