It’s tax season once again and this time of year leaves many Social Security recipients wondering exactly what types of Social Security benefits are taxable. After all, not all Social Security payments have taxes taken from them. This leaves you with the burden of determining whether or not you owe taxes on these benefits at the end of the tax year. Fortunately, there are some guidelines that you can follow to determine whether or not the benefits you have been receiving from the SSA are taxable and whether or not you will have to pay taxes on those benefits now that tax season has arrived.
Are SSI Benefits Taxable?
First and foremost, it is important to note that SSI (Supplemental Security Income) benefits are not taxable. These benefits are provided by the SSA’s needs-based SSI program and the funds received through this program are not counted as taxable income. Because of this, you will not have to pay taxes on these funds when it is time to file your annual tax return.
Are Retirement Benefits Taxable?
Social Security retirement benefits are taxable in certain situations. Whether or not you will have to pay taxes on your retirement benefits will depend on how much your total income and benefits were for the tax year in question.
Are Disability Benefits Taxable?
Like retirement benefits, Social Security Disability benefits are also taxable. However, whether or not you will have to pay taxes or how much you will have to pay will depend on your total income and benefits for the year.
Understanding the Limits of Taxes on Disability Benefits
So now that you know that retirement benefits and disability benefits can be taxable, how do you know whether your personal situation requires you to pay taxes on the benefits you received over the past year?
As a general rule, if your combined household income is between $32,000 and $44,000 and you file as married filing jointly, you will be responsible for paying taxes on half of the benefits you received during the year. If your combined household income is greater than $44,000, you may have to pay taxes on up to 85 percent of the benefits you received from the Social Security Administration.
If you file your federal taxes as an individual and your income is between $25,000 and $34,000, you may have to pay taxes on fifty percent of the retirement or disability income you received during the year. If you earned more than $34,000, you may be required to pay taxes on up to 85 percent of your Social Security income.
The good news is that if your only source of income is from Social Security Disability benefits, chances are you do not surpass the income limits and will likely not have to pay taxes on the Social Security benefits that you received.
If you do owe taxes and there is question as to what you owe or how much you should pay, you should consult with a qualified accountant or a Social Security Disability attorney so that he or she can help you prepare your tax return to ensure proper filing.
