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Quick Answer
Social Security is an important financial lifeline for older Americans. It provides them with the monthly income they need to pay bills and buy groceries. However, recipients naturally worry about whether their benefits can be taxed. Despite recent revisions to the law, Social Security payments are still taxable. But a new deduction can help seniors save more of their money.
If you want to know how much of your Social Security is taxable, it helps to have experienced legal counsel. Pond Lehocky Disability can provide the guidance you need to plan for the future. We can also explore Social Security Disability and other benefits that may be able to assist you.
Is Social Security Taxable?
Social Security is taxable. Whether your benefits are subject to federal income taxes, and how much, will depend on a few key facts. Your first step is to determine whether you must pay federal income tax on your Social Security. The IRS uses what it calls a combined income formula. This includes:
- Adjusted Gross Income (AGI): These are the typical sources of income. They include wages, interest, dividends, pension payments, and 401(k) distributions, less adjustments.
- Nontaxable interest.
- 50% of your Social Security benefits.
Add these up to get your combined income. Next, select the appropriate filing status below. Then, compare your combined income to the amounts:
If you file taxes as an individual:
- Up to $25,000: You will owe no tax.
- $25,000 to $34,000: Up to 50% of your benefits are taxable.
- Over $34,000: Up to 85% of your benefits are taxable.
If you file a joint tax return:
- Up to $32,000: You will owe no tax.
- $32,000 to $44,000: Up to 50% of your benefits are taxable.
- Over $44,000: Up to 85% of your benefits are taxable.
These figures provide useful estimates. But remember that taxes are complex, and other factors can impact your tax bill. Speak with a tax professional for help calculating your Social Security taxes.
Tax Deduction for Seniors
Although Social Security continues to be taxable, there is good news. Federal tax laws allow for a temporary tax deduction. This may mean that you owe less on your bill to the IRS.
Taxpayers who are 65 years or older – along with their spouses, if filing jointly – can claim a $6,000 tax deduction. They can do so for tax years 2025 to 2028. The rules are a little different if AGI exceeds $75,000 (or $150,000 for joint filers). In that case, the reduction is lowered by 6% although not below zero.
About 12% of seniors pay income tax on their Social Security. Your tax professional must understand the deduction and how to apply it. The IRS offers a few tips for finding the right tax preparer for you.
What About State Income Taxes?
Concerns about taxable Social Security benefits usually involve federal tax returns. But some recipients live in states that do not exempt Social Security. Here are some important details to know about these nine states:
Colorado
If you are 65 years of age or older, there is no state income tax on your federally taxable Social Security. If you are younger than 65, the first $20,000 of benefits is not subject to Colorado income tax.
Starting in 2025, taxpayers aged 55-64 can deduct all taxable Social Security payments. But their AGI must be $75,000 or less (or $95,000 or less for a couple filing jointly). $20,000 of federally taxable Social Security above those amounts may be excluded.
Connecticut
Up to 25% of Social Security benefits are subject to state income tax above these amounts:
- Single: Federally taxable Social Security income is not taxable if the AGI is under $75,000.
- Married, filing jointly: The AGI threshold is $100,000.
Minnesota
The state of Minnesota makes the following distinctions:
- Single filers or head of household: If AGI is $82,190 or less (for 2024), federally taxable benefits are exempt. For AGI of $82,191 and higher, benefits are given a partial exemption from state income tax. But at $118,191 and above, all Social Security is taxable by Minnesota.
- Married, filing jointly: Benefits are exempt if AGI is $105,380 or below. For AGI of $105,381 and above, the partial exemption applies. But at $141,381 and higher, all benefits are taxable by the state.
Montana
Social Security benefits are taxed just as they are for federal income tax purposes.
New Mexico
- Single filers: There is no tax on benefits if AGI is under $100,000.
- Married, filing jointly: There is no tax on benefits if AGI is under $150,000.
Rhode Island
Rhode Island applies these rules once an individual reaches their full retirement age. This is either 66 or 67, depending on the person’s birth year:
- Single filers: If income is below $104,200, there is no tax.
- Married, filing jointly, or a widow(er): No tax if the income is below $130,250. If both spouses collect but only one is of retirement age, their portion of benefits is exempt.
Utah
- Single filers: Benefits are taxed if modified AGI is over $45,000. There is also a state tax credit available.
- Married, filing jointly: Social Security is taxed if modified AGI is over $75,000. A state tax credit is also available.
Vermont
- Single filers: Benefits are exempt if AGI is $50,000 or less. If above $50,000 but below $60,000, benefits are partially exempt. If AGI is $60,000 or higher, benefits are fully taxable.
- Married, filing jointly: Benefits are exempt if AGI is $65,000 or less. If above $65,000 but below $75,000, benefits are partially exempt. If AGI is $75,000 or higher, benefits are fully taxable.
West Virginia
Single filers can exclude all benefits if their AGI is $50,000 or less. The amount is $100,000 for married, filing jointly taxpayers. The tax on benefits is phasing out in West Virginia. So the following rates will apply to AGI above the respective amounts:
- 2024: 35% exempt.
- 2025: 65% exempt.
- 2026: 100% exempt.
Talk to a Social Security Disability Lawyer for Help
Careful planning and preparation can help you keep more of your Social Security. If you need more information or you need help with Social Security Disability, contact us. Pond Lehocky is ready to serve you and your family today.