Taxable Social Security Calculator and Rules

You might have to pay income tax on your Social Security benefits if you have other sources of income. But if Social Security is your only source of income, you typically don’t pay tax on your benefits.

So, how much of your Social Security income will be taxable? This calculator helps you estimate combined income and the amount of Social Security included in your taxable income, which could be up to 85%. Scroll down for details on how taxes work, how the calculator works, and how you can manage taxes in retirement.

Social Security Tax Calculator for Retirees

How Taxes on Social Security Income Work

Retirees are often surprised to learn that Social Security benefits can be taxable. When you have income from pretax IRA or 401(k) withdrawals, taxable pensions, and other sources, your Social Security might be included in your taxable income.

Up to 85% of the benefit is taxable, meaning at least 15% of your Social Security is always tax-free. Note that this doesn’t mean you pay an 85% tax rate. Instead, some of your Social Security gets added to your income and is taxed at the same tax rates as other ordinary income.

If you have substantial savings or a healthy pension, there’s a good chance that you’ll have to include 85% of your retirement benefit in your income.

Income Levels

If your combined income exceeds certain levels, your benefit becomes taxable.

Single, Head of Household, or Qualifying Widow(er):

• Under $25,000: Not taxable
• $25,000 – $34,000: Up to 50% taxable
• Over $34,000: Up to 85% taxable

Married Filing Jointly:

• Under $32,000: Not taxable
• $32,000 – $44,000: Up to 50% taxable
• Over $44,000: Up to 85% taxable

Married Filing Separately:

• If you lived with your spouse at any time during the year, you will likely pay taxes on your benefits regardless of the amount

Combined Income

What is “combined income,” exactly? For many people, it’s simply your AGI plus half of your benefit. To calculate, include the following items for the year:

1. Your adjusted gross income (AGI)
2. Half of your Social Security retirement benefit
3. Tax-exempt interest

AGI typically includes the most common sources of income, including wages, interest earnings, pensions, taxable IRA withdrawals, and more. Of course, any earnings in tax-sheltered accounts should not count. If you get a 1099, that’s a sign that the income is likely in your AGI and your combined income.

Some additional adjustments may be necessary. For instance, you may need to add back in foreign income that wasn’t in your AGI. Or, you might get to subtract deductible IRA contributions. Check with the IRS for a full list of adjustments.

Then, find where your combined income falls within the levels above.

Important: You don’t necessarily include exactly 50% or 85% of your income. If you’re in the 50% range, the amount is up to 50% (it might be 7% or 49%, for instance). Similarly, the number can be less than 85% if you’re in the next range. However, once you’re over the maximum amount, it’s 85% for the year.

Strategies to Reduce Tax on Social Security

It might be possible to reduce the amount of tax you pay on Social Security benefits. To do so, you need to minimize income.

Retirement tax planning strategies like Roth conversions and spending from the right accounts can help reduce your income later in life. In many cases, you’ll pursue those strategies before Social Security income begins. That way, once you start taking benefits, your income might be lower.

You might pair those strategies with a Social Security bridge strategy. With that approach, you’d delay claiming while you spend down some savings. At the same time, your benefit increases because you’re delaying claiming. Ultimately, you might end up with lower income, and a bigger benefit. Since at least 15% of your benefit is tax-free, you end up with even more tax-free income.

What About the Social Security “Tax Torpedo”?

At certain income levels, the amount of tax you pay on a dollar of income can be surprisingly high. This is due to the “stacking” effect of:

1. Adding additional income to your return, plus
2. Bringing more Social Security into your taxable income.

For example, if you’re in the range where more of your Social Security becomes taxable as income rises, an additional withdrawal can cost more than you think.

Example: You’re in the 22% tax bracket, and currently, up to 85% of your Social Security benefit is taxable. You withdraw an additional $100 from a pre-tax IRA to cover expenses.

You would assume that $100 at a 22% rate results in $22 of additional tax. But what you’ve also done is brought $85 of your Social Security benefit into your taxable income. As a result, you’re paying more like 40.7% on that withdrawal.

The Direct Tax
Since you’re are in the 22% tax bracket, the $100 withdrawal itself incurs a direct tax.

• $100 x 22% = $22.00 tax due

The “Torpedo” Effect

Because of the Social Security tax rules, this $100 of new income makes an additional $85 of your Social Security benefits taxable (up to the 85% maximum).

• $85 x 22% = $18.70 tax due

Total Tax Due

You’d owe $22 plus $18.70 for a total of $40.70. Divide $40.7 into the $100 withdrawal, and the result is a “marginal effective” tax rate of 40.7%.

Should you freak out about this? Probably not. If you want to spend the money and you have it, then don’t let the tax tail wag the dog. However, if there are other sources of income to pull from (or if you can do some planning ahead of time), it’s worth considering a strategy that results in less tax.

In many cases, people are already at a full 85%, and they’re beyond the so-called Torpedo Zone. If you have enough income from pensions or sizable IRA withdrawals, for example, that may be the case.

Continue reading below, or get similar information from this video.

Calculator Instructions

This calculator is designed to cover the majority of retired households.

1. Enter your tax filing status.
2. Enter the total Social Security benefit for the year (your gross amount before deductions, typically found on SSA-1099).
3. Enter your additional taxable income, which is likely your AGI from Form 1040 (taxable IRA distributions, pension income, interest earnings, etc.).
4. Add income that wasn’t included in your AGI for the year (tax-exempt interest, etc.).
5. Adjust for any reductions (deductible IRA contributions, etc.).
6. To be safe, compare with the IRS tool.

Frequently Asked Questions