Will My Social Security Benefits Get Taxed?

Photo by Kues / Shutterstock.com

Welcome to the “2-Minute Money Manager,” a short video feature answering money questions submitted by readers and viewers.

Today’s question is about Social Security; specifically, how to know if you can expect to pay taxes on your Social Security and, if so, how much.

Watch the following video, and you’ll pick up some valuable info. Or, if you prefer, scroll down to read the full transcript and find out what I said.

You also can learn how to send in a question of your own below.

For more information, check out “A Simple Way to Maximize Your Social Security” and “7 Things You Should Do Before Claiming Social Security” You can also go to the search at the top of this page, put in the words “Social Security” and find plenty of information on just about everything relating to this topic.

And if you need anything from tips on finding the best savings account to finding the best financial advice, be sure and visit our Solutions Center.

Got a question of your own to ask? Scroll down past the transcript.

Don’t want to watch? Here’s what I said in the video

Hello, and welcome to your “2-Minute Money Manager.” I’m your host, Stacy Johnson, and this answer is brought to you by Money Talks News, serving up the best in personal finance news and advice since 1991.

Today’s question comes from Selfstarter2:

“I heard that if you retire early at age 63 and your spouse still works and is not getting Social Security benefits but makes more than $34,500 annually, your Social Security benefits will be taxed upwards of 50% to 85%. Is this true? And why?”

Selfstarter2 is mixing up a few things in this question: Let’s sort them out and come up with some answers.

Taking Social Security before full retirement age

Your full retirement age is between 65 and 67, depending on when you were born. But you can start Social Security as early as age 62. The catch? If you start early, you’ll get about one-third less than if you wait until full retirement age.

In addition, that benefit could be reduced even more if you take it early while you continue to work.

If you take Social Security early and earn more than $18,240 for 2020, Uncle Sam will reduce your benefit. If you’re under full retirement age for the entire year, he deducts $1 from your benefit for every $2 you earn above that annual limit.

Example: You make $28,240 for the year, exactly $10,000 more than the $18,240 limit. Your Social Security will be reduced by $1 for every $2 you earned, or $5,000.

If you wait until the calendar year in which you will reach your full retirement age, in 2020 you can earn $48,600 a year before your benefits will be reduced. After reaching full retirement age, you can earn as much as you want without any reduction.

Other important things to know:

  • These rules apply to wages from working; not investment, pension and other types of passive income.
  • This applies only to your earnings, not your spouse’s.
  • If your payments are reduced by working, you’ll get the money that was withheld back. After you reach full retirement age, the federal government recalculates your benefit amount to give you credit for any months in which your benefits were reduced because of your earnings.

Social Security and Income Taxes

Selfstarter2 also asked about paying income taxes on Social Security.

If you have significant sources of income other than Social Security, you could very well pay taxes on up to 85% of your benefits.

Whether you owe taxes on your Social Security depends on your “combined income.” The SSA defines this as the sum of:

  • Your adjusted gross income
  • Your nontaxable interest
  • One-half of your Social Security benefits

If you file an individual tax return and your combined income is between $25,000 and $34,000, you may owe income taxes on up to 50% of your Social Security benefits. Earn more than that, and up to 85% of your benefits could be subject to taxes.

If you file a joint return and your combined income is between $32,000 and $44,000, you may owe taxes on up to 50% of your benefits. Earn more than that, and up to 85% could be taxable.

Here’s a table that may help clarify:

Single Married filing jointly
Benefits not taxed: < $25,000 < $32,000
50% of benefits taxed: $25,000 – $34,000 $32,000 – $44,000
85% of benefits taxed: > $34,000 > $44,000

It’s not as bad as it sounds

In his question, Selfstarter2 said that if “your spouse still works and is not getting Social Security benefits but makes more than $34,500 annually, your Social Security benefits will be taxed upwards of 50% to 85%.”

No. That’s false.

You’re never paying 50% to 85% taxes on your Social Security. Depending on your income, up to 85% of your Social Security will be taxable at your normal bracket, not at 50% to 85%.

Bottom line? You should be aware of the penalties for working if you take Social Security early. And you should also be aware that if you have other income, part of your Social Security benefits could be taxable. But neither of these things is the end of the world. If you’re penalized when you work, you’ll get it back. And if part of your Social Security is taxed, unless you’re in a high bracket, it may not cost you that much.

I hope that answers your question, Selfstarter2.

If you’ve got a question of your own, you might get it answered by simply replying to our daily newsletter and asking it! Not getting our free newsletter? Go to MoneyTalksNews.com and subscribe in upper right-hand corner. Takes five seconds, makes you richer.

See you all right here, next time!

Got a question you’d like answered?

You can ask a question simply by hitting “reply” to our email newsletter, just as you would with any email in your inbox. If you’re not subscribed, fix that right now by clicking here. It’s free, only takes a few seconds, and will get you valuable information every day!

The questions I’m likeliest to answer are those that come from our members. You can learn how to become one here. Also, questions should be of interest to other readers. In other words, don’t ask for super-specific advice that applies only to you. And if I don’t get to your question, promise not to hate me. I do my best, but I get a lot more questions than I have time to answer.

About me

I founded Money Talks News in 1991. I’m a CPA, and I’ve also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.

Got any words of wisdom you can offer on today’s question? Share your knowledge and experiences on our Facebook page. And if you find this information useful, please share it!

How to find cheaper car insurance in minutes

Getting a better deal on car insurance doesn't have to be hard. You can have The Zebra, an insurance comparison site compare quotes in just a few minutes and find you the best rates. Consumers save an average of $368 per year, according to the site, so if you're ready to secure your new rate, get started now.

Read Next
17 Unusual Things You Can Clean in a Dishwasher
17 Unusual Things You Can Clean in a Dishwasher

Many everyday items do not require meticulous hand washing.

3 Costly Social Security Mistakes That Women Make
3 Costly Social Security Mistakes That Women Make

Women face unique challenges when planning for retirement and making these mistakes can result in a skimpier retirement.

8 Things I Always Buy at Costco
8 Things I Always Buy at Costco

From bacon to birthday cakes, here are my favorite deals at the popular warehouse store.

14 Products That Keep Foods Fresh Longer
14 Products That Keep Foods Fresh Longer

We’ve rounded up innovative Amazon purchases to lengthen the life of your favorite foods and beverages.

Don’t Pay for These 10 Things: They Are Free With a Library Card
Don’t Pay for These 10 Things: They Are Free With a Library Card

Before you spend another dollar on items and services like these, check with your public library.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
This Gas Station Scam Is Victimizing More Drivers
This Gas Station Scam Is Victimizing More Drivers

For the second straight year, a growing number of Americans believe they’ve fallen prey to this scam.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

7 Unusual Ways to Declutter Your Home
7 Unusual Ways to Declutter Your Home

Tired of possessions weighing you down? Here are seven ways to declutter painlessly and effectively.

This Is the Most Popular Age for Claiming Social Security
This Is the Most Popular Age for Claiming Social Security

Both men and women are most likely to start receiving Social Security benefits at this age.

21 Things You Should Always Buy at a Dollar Store
21 Things You Should Always Buy at a Dollar Store

Dollar stores have great bargains on both everyday and occasional purchases.

6 Things You Should Never Buy at Trader Joe’s
6 Things You Should Never Buy at Trader Joe’s

We love Trader Joe’s for plenty of reasons. But think twice about this handful of products.

Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?
Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?

You could save more than $30,000 by setting aside these costly expenses for just one year.

Don’t Toss These 7 Household Items — Sell Them
Don’t Toss These 7 Household Items — Sell Them

Here’s how to earn cash as you give new life to these unwanted items.

6 Legal Documents Retirees Need — but Don’t Have
6 Legal Documents Retirees Need — but Don’t Have

Few retirees have these documents that are crucial to their golden years — especially during a pandemic.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

Eat This Food If You Want to Avoid Alzheimer’s Disease
Eat This Food If You Want to Avoid Alzheimer’s Disease

One type of food associated with the Mediterranean diet offers especially large benefits.

5 Awesome Places You Can Retire Overseas on $2,000 a Month or Less
5 Awesome Places You Can Retire Overseas on $2,000 a Month or Less

In this week’s podcast: tips on retiring overseas — from someone who’s been helping American expats for decades.

11 Expenses That Quietly Drain Your Wallet
11 Expenses That Quietly Drain Your Wallet

It’s scandalously easy to overspend in these areas of your life.

9 Dumb Ways You Are Ruining Your Home Value
9 Dumb Ways You Are Ruining Your Home Value

Homeowners, beware these mistakes that can drive away potential buyers.

18 Amazon Purchases That We Are Loving Right Now
18 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

7 Tips for Building an Emergency Stockpile
7 Tips for Building an Emergency Stockpile

A pandemic or natural disaster could leave you reliant on your existing food supply. Is your pantry prepared?

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

15 Outrageously Overpriced Products — and How to Save on Them
15 Outrageously Overpriced Products — and How to Save on Them

Retailers mark up products by hundreds of times their cost — but you don’t have to pay the premium.

Why Half of Retirees Now Owe Taxes on Social Security
Why Half of Retirees Now Owe Taxes on Social Security

Growing numbers of seniors are paying taxes on their Social Security benefits, but you might be able to avoid this fate.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.