Is my Social Security taxable?

There is often confusion as to whether Social Security is taxable income or not. Unfortunately, the answer to that question is not as straightforward as one would hope. The answer ultimately depends on which income tax we are discussing as well as a number of other factors.

Let’s start with the easy portion of the question.

For state of Ohio tax computations and for local tax purposes, Social Security benefits are not taxable. Social Security is not considered earned income for local tax purposes, and Ohio has a specific provision whereby these benefits are excluded from state tax calculations.

If the only income you received during the tax year was your Social Security or equivalent railroad retirement benefits, your benefits are probably not taxable and you may not even be required to file a tax return.

If you have wages, pensions, interest, dividends, self-employment or other income, up to 85% of your Social Security benefits could be included in your adjusted gross income and therefore be taxable.

The computation to determine whether your benefits are taxable begins by adding one-half of the total Social Security benefits you received to all of your other income, including any taxexempt interest and other exclusions from income. You then compare this total to the base amount for your given filing status. If the total from your computation is greater than the base amount then some of your benefits may be taxable.

The base amounts are $32,000 for married couples filing jointly; $25,000 for single, head of household, qualifying widow or widower with a dependent child, or married individuals filing separately who did not live with their spouse at any time during the year; and $0 for married persons filing separately who lived with their spouse at any point during the year.

If you file a federal tax return with a filing status of single, head of household, qualifying widow(er), or married filing separately and your income including Social Security benefits is between $25,000 and $34,000 you will have to include up to 50 percent of your benefits in your AGI. If your income is more than $34,000 then up to 85 percent of your benefits may be included in your AGI.

If you the filing status of your federal tax return is married filing jointly and your combined income including Social Security benefits is between $32,000 and $44,000 you will have to include up to 50 percent of your benefits in your AGI. If you file a joint return and your income is greater than $44,000 then up to 85 percent of your benefits may be included in your AGI. In other words, the long answer to the original question on whether Social Security Benefits are taxable is that up to 85 percent of your Social Security benefits may be taxable depending on income other than Social Security that you may have.

To determine the exact percentage of your Social Security benefits that are included in your AGI you complete a worksheet contained in IRS Publication 915 which is available on the IRS.gov website. Each January you will receive a Social Security Benefit Statement (Form SSA1099) showing the amount of benefits you received for the prior year. You will need this benefits statement when you complete your income tax return. If you do have to pay taxes on your Social Security benefits you can choose to make quarterly estimated tax payments, or you can choose to have federal income taxes withheld from your monthly benefits.

So, make sure that you are accurately including the appropriate amount of Social Security benefits in your tax return. Also, make sure that you are paying estimated taxes or having withholding taken out to cover this income so that you are not met with any surprises at tax filing time.

Paul Pahoresky is a partner in the accounting firm of JLP CPAs. He can be reached at 440-9741040x14 or at paul@ jlpcpas.com. Consult your tax advisor for your specific situation for additional information and guidance on these topics.

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