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Social Security Benefits and Taxation

By Edited Mar 30, 2016 0 0

Social security benefits are government mandated, regulated, and primarily funded. These benefits primarily comprise of healthcare benefits, retirement benefits, disability benefits and any other benefits granted to individuals by the government n order to effectuate social justice, which provides more in law for those who have less in life. However, there is much debate as to whether or not social security benefits are taxable or not taxable. This article will answer that question. 

Are Social Security Benefits Taxable: The Answer

The simple answer is that as a general rule social security benefits are not taxable. However, this is subject to a lot of exceptions. The simplest discussion on exceptions would be those earning higher types and amount of income will still be subjected to taxation in one form or another. Some of the better-known exceptions will be tackled by this article. This article will also provide information on where to find more information regarding these exceptions. 

Are Social Security Benefits Taxable: Wages and Self Employed Income

As a general rule these income are taxable. Without going into detail as to the amount and computation of the tax, the simplest answer would be that:

  1. Wages are subject to tax, shared by the employer and the employed
  2. Self-employed income is taxable and the taxpayer pays for the employer and employee share but is also allowed to claim a higher amount of tax deductible to offset the seemingly higher amount shouldered. 

However, there are noted exceptions, in that these types of income are not subject to taxation

  • Local government workers who earn income thru their employers' alternative retirement system.
  • Self employed individuals whose net annual earnings is less than $400
  • Wages earned as an election worker, up to a certain amount.
  • Wages earned as a household employee, up to a certain amount
  • Wages earned by college students under the Federal Work Study programs prior to January 2011
  • Wages earned by a minister, priest, imam, or any other similar designation who base their objection on their religious belief, unless otherwise provided. 

Are Social Security Benefits Taxable: Retirement and Disability Benefits

A huge part of social security benefits comprise of retirement pay and disability benefits. The simplest discussion here would be that only a maximum of 50% to 85% of social security benefits related to can be taxable. This is applicable only if combined income is above the social security threshold. 

The Computation

The general rule is that higher the amount above the exempted range the higher the tax on the benefit. This is regardless of whether or not it is for income, retirement, disability, etc. Simply put:

  1. Income between $25,000 and $34,000 may be required to pay up to 50%
  2. Income more than $34,000 may be required to pay 85%
  3. Joint filing (spouses) between $32,000 and $44,000 may have to pay 50%
  4. Joint filing (spouses) more than $44,000 may be required to pay up to 85% 

Reference Websites

For a more detailed discussion, it would be best to go online and visit the website of the social security administration. This website will not only give detailed and accurate information but it is also accessible for free. Tip; get additional website resources from this site rather than from search engine results to minimize the chances of contacting a scammer.



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