IRS Publication 915: Is Social Security Taxable?

Unless you’re Warren Buffet or Bill Gates, your Social Security checks aren’t going to finance a luxurious retirement lifestyle.  In fact, they’re going to be just enough to get by…if you’re lucky.  On top of that, if you make over a certain amount in retirement, your Social Security money may be taxable.  IRS Publication 915 is the ultimate guide to how your Social Security benefits are taxable, if at all.

If Social Security is All You Have…

If you are lucky or wise, or a good combination of both, you’ll have all sorts of income during retirement.  We all hope that Social Security won’t be our only source after we retire.  However, if this does turn out to be your only source of income, it probably won’t get taxed by the IRS.  That’s because you pay income tax on Social Security only if it reaches a certain dollar amount.  If half your Social Security income totals more than $25,000 you might still get taxed.  Otherwise, you’re good, provided you don’t have other sources of income.

That $25,000 mark is called the base amount.  That can change any year, and it’s for an individual.  If you are married filing jointly then the amount is $32,000.  Again, if half your Social Security wages are less than the base amount, and that’s all you take in, you not only won’t have to pay taxes on it (probably) but you might not have to file a return, either.

If You Have Other Sources of Income Too…

If you have other sources of income, add them to half your Social Security income and see if it tops the base amount.  You can still squeak by and not have to pay income tax if it’s less than the base amount.  However, you will have to file a return if you have retirement income other than Social Security.

In my experience almost everyone has something lined up in addition to Social Security, even those who didn’t plan at all and even those who didn’t save a dime.  These “other” sources of income would be…

  • a part-time job
  • money from a forgotten pension fund
  • Certificates of Deposit that come due
  • actually if you have nothing lined up then part time job is your best bet…

And that’s why you see people who are 70+ bagging groceries at the supermarket.  For one reason or another Social Security is all they’ve got.  But that’s another lesson!

IRS Publication 915 is the ultimate guide to how the IRS treats your Social Security benefits when you start drawing on them.  For a look at all 30 pages go here to the IRS website.