What this line means
The taxable portion of your Social Security benefits. The IRS uses a formula based on your “combined income” (AGI + nontaxable interest + half your Social Security) to determine whether 0%, 50%, or 85% of your benefits are taxable. Most retirees with income beyond Social Security end up with some portion taxable.
Does this apply to you?
- You received Social Security benefits and have other income (pensions, investments, part-time work) pushing your combined income above $25,000 (single) or $32,000 (married filing jointly)
- You are married filing jointly and your combined household income makes a portion of benefits taxable
- You did a Roth conversion or had a capital gain that spiked your income for the year
Easy to overlook
The 85% maximum is not a flat rate Social Security taxation is not “either taxable or not.” It is a tiered formula. At the first threshold ($25,000 single / $32,000 MFJ), up to 50% becomes taxable. At the second threshold ($34,000 single / $44,000 MFJ), up to 85% becomes taxable. Many retirees are in between, with exactly 50% to 85% taxable — but they report either 0% or 85% instead of running the actual worksheet. 1 IRS Publication 915 — Social Security taxation worksheet
One-time income events spike Social Security taxation A Roth IRA conversion, the sale of a home, or cashing in savings bonds can push combined income well above the thresholds for a single year. This makes a much larger portion of Social Security benefits taxable that year. Retirees who do a large Roth conversion are often surprised that it also increased the tax on their Social Security. 2 SOI data — retirees underreporting taxable Social Security
Watch out for this
Using the wrong worksheet. The Social Security Benefits Worksheet in the 1040 instructions is the standard method, but if you also received a foreign Social Security benefit or made contributions to a traditional IRA while receiving Social Security, you may need to use the worksheets in Publication 915 instead. Using the wrong worksheet produces an incorrect taxable amount.
Footnotes
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IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits. https://www.irs.gov/pub/irs-pdf/p915.pdf ↩
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IRS Statistics of Income, Individual Income Tax Returns. https://www.irs.gov/statistics/soi-tax-stats-individual-income-tax-returns ↩