Are My Social Security Benefits Taxable?

March 27th, 2016 | By | Posted in Social Security

Taxation is one of the horrors of the modern world. We all know when tax season comes around; the W2s come flooding into your mailboxes and the increased commercials for tax preparation on the television are rampant. One of the biggest questions surrounding social security benefits and taxes is whether or not people need to pay taxes on their benefits.

Security Card

Usually this isn’t a problem for most people because they don’t have another source of income or aren’t making enough of an income for it to be taxed. But, there are some cases where a spouse is making enough of an income to where SSDI (social security disability benefits) need to be taxed. In this case, there are a few very simple charts to tell you what amount of tax you’ll need to pay if you are a beneficiary. Here are the individual and married couple brackets that show whether or not you’ll be taxed based on your income, based on an article by nolo.com.

Individuals:

  • For a 0 to $2,083 monthly income, you won’t have any portion of your benefits taxed.
  • For a $2,084 to $2,833 monthly income, you’ll have 50% of your benefits taxed.
  • For a $2,834 and up monthly income, you’ll have 85% of your benefits taxed.

Married:

  • For a 0 to $2,666 monthly income, you won’t have any portion of your benefits taxed.
  • For a $2,667 to $3,666 monthly income, you’ll have 50% of your benefits taxed.
  • For a $3,667 and up monthly income, you’ll have 85% of your benefits taxed.

Though this may seem like you’ll get hardly any of your benefits, you’ll need to keep in mind that if they are subject to taxation, they will be taxed at your marginal income rate, which means that they won’t actually be taking 85% of your SSDI.

Social Security card and tax formsAnother thing that you’ll have to consider is whether your state will also be taxing your income. Most states fortunately do not tax these types of benefits. But, the following states do, according to nolo.com:

  • Connecticut
  • Colorado
  • Iowa
  • Kansas
  • Montana
  • Minnesota
  • Nebraska
  • North Dakota
  • Rhode Island
  • Utah
  • Vermont
  • West Virginia

Lastly, one of the things that you’ll need to keep in mind about receiving these types of benefits is that if you receive a lump-sum payment paying for retroactive benefits or back payments, you may have to pay a lot more taxes because that will up your income for the year. There are a few ways to avoid this, especially if it is back pay from monthly benefits from the year before. Talk to a Social Security Disability attorney in Idaho Falls about your taxable social security benefits today.

 

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