Are my Social Security payments subject to income tax?
Answers | 6
As when dealing with anything tax related, the answer is "that depends". A portion of SS benefits is taxed if income above a "base amount" (which is determined by your filing status) is received in addition to your SS benefits. If you are single, if your combined income is over $25,000 (base amount) and under $34,001, up to 50% of your benefits are taxable. If your combined income is above $34,000, up to 85% of your benefits are taxable. The maximum amount of tax assessed for social security is 85% of the benefit.
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. 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 percent of your benefits.
more than $34,000, up to 85 percent of your benefits may be taxable.
file a joint return, and you and your spouse have a combined income* that is
between $32,000 and $44,000, you may have to pay income tax on up to 50 percent of your benefits
more than $44,000, up to 85 percent of your benefits may be taxable.
While I cannot really add to the excellent responses provided already, I will encourage you to seek professional advice from a qualified financial planner and/or tax preparer.
For reference, feel free to check out the information from the IRS - yes, it is the government but they really can help.