Are Federal Taxes Taken Out of Social Security Benefits?

Tax withholding from your Social Security payment is voluntary.
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You may owe taxes on up to 85 percent of your Social Security benefits. How much you owe depends on your tax filing status and your other sources of income. The Social Security Administration does not automatically withhold taxes from your benefits, but you may elect to have taxes withheld to avoid owing a large sum at the end of the year. Having taxes withheld will reduce the amount of the monthly payment you receive.

Do You Owe Taxes?

The Internal Revenue Service considers the total of your adjusted gross income, nontaxable interest you earned during the year plus one-half of your Social Security income from the year as your "combined income." If your combined income exceeds limits set by the IRS, you'll owe taxes on up to 85 percent of your Social Security benefits. At the time of publication, if you file taxes as an individual and have a combined income of between $25,000 and $34,000, you'll owe taxes on up to 50 percent of your Social Security benefits. If your combined income is more than $34,000, you must pay taxes on 85 percent of the amount you receive from Social Security. For a married couple filing a joint return, you'll owe taxes on 50 percent of your Social Security benefits if your combined income is between $32,000 and $44,000 and taxes on 85 percent of your benefits if your combined income is over $44,000.

Paying Your Taxes

If you think you are going to owe taxes on your Social Security income, you may elect to make quarterly estimated tax payments throughout the year. Use the IRS Estimated Tax Worksheet to figure the amount you should pay each quarter. Or you may request that the Social Security Administration withhold taxes from your payment each month. Complete Form W-4V to make this request. You must choose the percentage you want withheld each month -- either 7, 10, 15 or 25 percent.

Completing Your Tax Return

In January of each year, you will receive a Form SSA-1099, which shows the amount of benefits you received during the previous year and the total of any taxes you had withheld from these benefits. Report the total of your benefits on line 20 of Form 1040. If your only income is from your Social Security benefit, you may not owe any taxes. You can use the Social Security Benefits Worksheet included in the Form 1040 instructions to determine if any of your benefits are taxable.

Other Considerations

If you are married but file a separate return, the limits for married couples do not apply to you and you will probably owe taxes on your benefits. If you elect to have taxes withheld from your Social Security benefit payments, you may change the amount withheld at any time by submitting a new Form W-4V. If you want to stop withholding, complete a Form W-4V and indicate that you want zero tax withheld.