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How social security benefits are taxed

February 1, 2017 by Reynolds & Rowella Leave a Comment

Are you wondering if your social security retirement, survivor, and disability benefits will be subject to federal income tax on your 2016 return?

1. Generally, when these benefits are taxed is determined by your “provisional income.”

Provisional income (PI) is the product of a formula used for no other purpose than figuring out the taxable percentage of social security benefits. To compute your provisional income, total your adjusted gross income, any tax-exempt interest or similar nontaxable revenue, and one-half of your social security retirement benefits for the year. How much of your benefits are taxed depends on this “base amount.”

– Joint filers with PI below $32,000 ($25,000 for single filers) owe no tax on benefits.

– Joint filers with PI between $32,000 and $44,000 ($25,000 and $34,000 for single filers) are taxed on a sliding scale that tops out at 50% of benefits received.

– Joint filers with PI over $44,000 ($34,000 for single filers) are taxed on more than 50% and up to 85% of benefits.

Note that supplemental security income payments (SSI) are not taxable. For answers to questions about your benefits, contact us at consulting@reynoldsrowella.com.

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Filed Under: Social Security Benefits and Taxes Tagged With: Accounting Services Fairfield County CT, Best Accounting Firms Fairfield County CT, Financial Planning Fairfield County CT, Social Security Benefits

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