Social Security provides survivors' benefits for the families of deceased workers, with certain conditions. As with other forms of Social Security income, including spouse and retirement benefits, a portion of the payment may be subject to federal income tax, depending on the "combined income" of the beneficiary.
Who May Claim Survivors' Benefits
Everyone who works is familiar with Social Security, but quite a few know little about the survivors' benefit program, which operates like a life insurance policy for the immediate family of a deceased worker. The benefit amount depends on the earnings record of the worker and the age of the person who makes the claim. To claim a survivors' benefit, widows and widowers must be at least 60 years old. Survivors' benefits are also available if the survivor is caring for a child who is younger than 16 or is disabled. Children may claim survivors' benefits up to age 18; that limit rises to 19 if they're in school full time, and there's no age limit if they are disabled before the age of 22.
Income Taxes on Survivors' Benefits
The Internal Revenue Service may tax a portion of Social Security survivors' benefits depending on combined income, which includes earned income, tax-free interest income and half of all Social Security income. If both a parent and child are drawing survivors' benefits, the amount subject to income tax is figured separately for each individual; the IRS does not assign the parent's income to the child. Most children do not reach the income threshold for taxation of their benefits.
Important Income Thresholds
For unmarried children, widows and widowers, the IRS will tax a portion of survivors' benefits beginning at $25,000 of combined income. Over this threshold, 50 percent of the total survivors' benefit paid during the year is added to taxable income and taxed at the individual's marginal rate. When combined income reaches $34,000, the portion of Social Security benefits subject to tax rises to 85 percent.
Forms and Information
Social Security issues a 1099-SSA to anyone who receives any kind of Social Security benefit. Survivors' benefits appear on separate 1099-SSAs for each individual, adult or child, who receives them. Although the IRS provides forms and worksheets to calculate the amount subject to tax, consult a tax professional if you're uncertain how the rules apply to your particular situation.