Social Security benefits are modest compared to past earnings of recipients, so the annual cost-of-living adjustment (COLA) increase is vital to help the monthly payments keep pace with inflation. However, as the dollar amount that beneficiaries receive inches upward they could be in for a rude surprise; they may surpass thresholds established, above which a portion of their Social Security income becomes taxable.
Before 1984, Social Security benefits were not taxed. However, to keep the Trust Fund that supports the program solvent, bipartisan legislation was passed to tax a portion of payments to seniors citizens, surviving spouses, and the disabled if they had income above certain thresholds.
At the onset, less than one in ten beneficiaries paid income tax on their benefits. But that percentage has risen over time. Unlike benefits, the thresholds were not indexed to inflation and in the intervening four decades no inflation adjustments have been made. This meant that as benefits rose, more recipients crossed over the thresholds. Now 56 percent of beneficiaries pay income tax on a portion of their benefits, sometimes as much as 85% if their total income exceeds upper thresholds.
There is no age at which you will no longer be taxed on Social Security payments. So, if those payments when combined with your other forms of income, exceed one of the two thresholds, then you will have to pay at least federal taxes on either 50% or 85% of the benefits you receive. At the state level, there are only nine that currently tax Social Security benefits.
How are Social Security payments taxed?
The tax rate for Social Security benefits varies based on the taxable household income of recipients. As well, one’s tax bracket is dependent on the filing status of the Social Security recipient.
Individuals with a Total Gross Income, including Social Security, of more than $25,000 will be taxed on up to 50 percent of their Social Security income. Couples who file jointly will begin being taxed when their total income exceeds $32,000.
Individuals earning more than $34,000, or couples with a combined gross income of at least $44,000, will be taxed on up to 85 percent of their Social Security benefits.
Typically it is only retirees, who have very little household income aside from their Social Security entitlement, who could be exempt from any form of taxation on the payments.
How is the Social Security tax rate calculated?
The rate of taxation levied on Social Security payments is similar to that of other forms of income. Filers must submit their adjusted gross income, which combines their salary, Social Security benefits and all other sources of taxable income. If that total exceeds the minimum threshold then at least 50 percent of your Social Security benefits will be considered taxable income and will be treated as such.
FAQs
Key Takeaways. Social Security benefits may or may not be taxed after 62, depending on your other income earned. If you only receive Social Security benefits and no other income, then you likely won't pay federal income taxes. In 2024, ten states tax Social Security benefits in some manner.
Does a 70 year old have to pay taxes on Social Security? ›
While you may have heard at some point that Social Security is no longer taxable after 70 or some other age, this isn't the case. In reality, Social Security is taxed at any age if your income exceeds a certain level.
At what point do you stop paying Social Security taxes? ›
You aren't required to pay this tax on any income beyond the Social Security wage base limit. Employees and employers are each required to pay a 6.2% tax on wages. In 2025, the limit is estimated to go up to $174,900, which has consistently increased from $168,600 in 2024 and $160,200 in 2023.
At what amount is Social Security no longer taxed? ›
Income Taxes and Your Social Security Benefit (En español)
Between $25,000 and $34,000, you may have to pay income tax on up to 50% of your benefits. More than $34,000, up to 85% of your benefits may be taxable.
At what age do seniors stop paying federal taxes? ›
Taxes aren't determined by age, so you will never age out of paying taxes. Basically, if you're 65 or older, you have to file a tax return in 2022 if your gross income is $14,700 or higher.
How much money can a 72 year old make without paying taxes? ›
Taxes aren't determined by age, so you will never age out of paying taxes. Basically, if you're 65 or older, you have to file a return for tax year 2023 (which is due in 2024) if your gross income is $15,700 or higher.
At what age is income not taxable? ›
Social Security income can be taxable no matter how old you are. It all depends on whether your total combined income exceeds a certain level set for your filing status. You may have heard that Social Security income is not taxed after age 70; this is false.
Is the federal government going to stop taxing Social Security? ›
PAUL – Today, U.S. Representative Angie Craig announced new legislation to eliminate federal taxes on Social Security benefits for seniors. Rep. Craig's You Earned It, You Keep It Act would eliminate all federal taxes on Social Security benefits beginning in 2025 – putting money back into the pockets of retirees.
Will Social Security be taxed in 2024 for seniors? ›
Unless your combined income for 2024 is less than $25,000 (less than $32,000 for married couples filing jointly), a percentage of your Social Security payments will be subject to income tax.
Why are Americans getting $4800 from Social Security? ›
For this year, the highest-earning Social Security beneficiaries can see payments of $4,873 if they retired at age 70. This is in stark contrast to the average monthly benefit, however. Across the board, payments increased by roughly $50 a month due to the COLA.
If Social Security is your sole source of income, then you don't need to file a tax return. However, if you have other income, you may be required to file a tax return depending on the amount of other income.
At what age can I earn unlimited income while on Social Security? ›
How much can you earn and still get benefits? later, then your full retirement age for retirement insurance benefits is 67. If you work, and are at full retirement age or older, you may keep all of your benefits, no matter how much you earn.
Do seniors still get an extra tax deduction? ›
IRS extra standard deduction for older adults
For 2024, the additional standard deduction is $1,950 if you are single or file as head of household. If you're married, filing, jointly or separately, the extra standard deduction amount is $1,550 per qualifying individual.
Do I have to pay taxes if my only income is Social Security? ›
Generally, if Social Security benefits were your only income, your benefits are not taxable and you probably do not need to file a federal income tax return.
At what age do you stop paying Social Security taxes? ›
The Bottom Line. When do you stop paying Social Security tax? The answer is almost always "never" as long as you're employed but there are exceptions. Consider consulting with a tax professional if you think any of these situations or exceptions might apply to you.
Can I get a tax refund if my only income is Social Security? ›
You would not be required to file a tax return. But you might want to file a return, because even though you are not required to pay taxes on your Social Security, you may be able to get a refund of any money withheld from your paycheck for taxes.
How much can a 70 year old earn without affecting Social Security? ›
Starting with the month you reach full retirement age, there is no limit on how much you can earn and still receive your benefits.
Is there really a downside to claiming Social Security at 70? ›
Waiting until 70 to claim benefits allows you to maximize your monthly payments, but there's a chance you may not live long enough to see it. As you age, you run a higher risk of developing a serious health condition.
