How Social Security benefits are taxed

Many retirees are surprised to learn that Social Security benefits can be subject to federal income tax. Whether they are, and how much, depends on the household's other income. The rules are set out in IRS Publication 915, and the figures in this article come from the edition for 2025 tax returns, the most recent one available.

The test: other income plus half of benefits

The IRS starts with a quick comparison. Add together:

1. one-half of the Social Security benefits received for the year,
2. all other taxable income, such as wages, pensions, taxable interest, dividends, capital gains and withdrawals from pre-tax retirement accounts, and
3. any tax-exempt interest, such as interest on municipal bonds.

That total is then compared with a base amount for the filing status. If the total is at or below the base amount, none of the benefits are taxable. Supplemental Security Income (SSI) is a separate program and its payments are not taxable.

The thresholds

For 2025 returns, Publication 915 lists these amounts:

Two points are often misread.

First, "up to 85% taxable" does not mean an 85% tax rate. It means that as much as 85% of the benefit is added to taxable income, where it is taxed at the household's ordinary rates. At least 15% of benefits is never federally taxed.

Second, crossing a threshold does not suddenly make 50% or 85% of the whole benefit taxable. The taxable portion phases in as income rises above each threshold. The exact figure comes from a worksheet in the Form 1040 instructions or in Publication 915.

Unlike many dollar figures in the tax code, these thresholds are fixed in the law and are not indexed to prices or wages.

A hypothetical example

Suppose a single retiree receives $24,000 in Social Security for the year and has $20,000 of other taxable income from a pension and retirement account withdrawals. These are illustrative round numbers.

• One-half of benefits is $12,000.
• Adding the $20,000 of other income gives $32,000.
• That is $7,000 above the $25,000 base amount and below the $34,000 second threshold.

In this range, the taxable part is the smaller of half the excess ($3,500) or half the benefits ($12,000). So $3,500 of the $24,000 in benefits would be included in taxable income. Whether any tax is actually owed then depends on deductions and the rest of the return.

How other retirement income interacts

Because the test counts other income, decisions about where retirement spending money comes from can change how much of a benefit is taxed.

• Pre-tax account withdrawals. Distributions from a traditional 401(k) or IRA, including required minimum distributions, are other income for this test.
• Roth conversions. The converted amount is taxable income in the year of the conversion and can push more of that year's benefits into the taxable range. See Roth conversions explained.
• Qualified Roth withdrawals. These are generally not included in taxable income, so they generally do not enter the calculation.
• Tax-exempt interest. Municipal bond interest is not taxed itself but is counted in the test.

The article on how different kinds of retirement income are taxed covers each income type in more detail.

The additional deduction for people 65 and older

The 2025 tax law commonly called the One Big Beautiful Bill Act did not change the formula above. It did add a temporary deduction that lowers taxable income for many older taxpayers. According to the IRS summary, for tax years 2025 through 2028 a person who is 65 or older may claim an additional deduction of $6,000 ($12,000 for a married couple where both spouses qualify). The deduction phases out for taxpayers with modified adjusted gross income over $75,000 ($150,000 for joint filers), and married taxpayers must file jointly to claim it.

The deduction can reduce or eliminate the tax owed on benefits for some households. Benefits can still be taxable under the rules above.

Paying the tax

Federal income tax is not taken out of Social Security payments unless the recipient asks. Publication 915 describes two common approaches:

• requesting voluntary withholding from benefits by filing Form W-4V or by asking the Social Security Administration online or by phone, or
• making quarterly estimated tax payments, or having more tax withheld from other income such as a pension.

Each January, the Social Security Administration sends Form SSA-1099 showing the benefits paid in the prior year. The net amount in box 5 is the figure used on the tax return.

State taxes are separate

Everything above concerns federal income tax. States set their own rules on whether and how benefits are taxed, so the treatment depends on where a person lives. State rules and individual tax situations vary, and a tax professional can advise on how these rules apply to a specific return.

Questions worth asking

• What will other income be in the first few years of collecting benefits, including any required minimum distributions?
• Would a large one-time event, such as a Roth conversion or the sale of a property, land in a year when benefits are being paid?
• Is withholding or estimated tax set up so there is no unexpected balance due?