Wink Inc.
Enrolled Agents
America’s Tax Experts
®
Wink Tax Services
Minimizing Tax on Social Security Benefits
Article Highlights:
Income as a Factor
Filing Status as a Factor
85% Maximum Taxable
Base Amounts
Deferring Income
Maximizing IRA Distributions
Whether your Social Security benefits are taxable (and, if so, the amount that is taxed) depends on a number of issues. The
following facts will help you understand the taxability of your Social Security benefits.
For this discussion, the term “Social Security benefits” refers to the gross amount of benefits you receive (i.e., the amount
before reduction due to payments withheld for Medicare premiums). The tax treatment of Social Security benefits is the
same whether the benefits are paid due to disability, retirement or reaching the eligibility age. Supplemental Security
Income (SSI) benefits are not included in the computation because they are not taxable under any circumstances.
The amount of your Social Security benefits that are taxable (if any) depends on your total income and marital status.
o
If Social Security is your only source of income, it is generally not taxable.
o
On the other hand, if you have other significant income, as much as 85% of your Social Security benefits
can be taxable.
o
If you are married lived with your spouse at any time during the year, and file a separate return from your
spouse using the married filing separately status, 85% of your Social Security benefits are taxable regardless of
your income. This is to prevent married taxpayers who live together from filing separately, thereby reducing the
income on each return and thus reducing the amount of Social Security income subject to tax.
The following quick computation can be done to determine if some of your benefits are taxable:
Step 1. First, add one-half of the total Social Security benefits you received to the total of your other income, including
any tax-exempt interest and other exclusions from income.
Step 2. Then, compare this total to the base amount used for your filing status. If the total is more than the base
amount, some of your benefits may be taxable.
The base amounts are:
$32,000 for married couples filing jointly;
$25,000 for single persons, heads of household, qualifying widows/widowers with dependent children, and married
individuals filing separately who did not live with their spouses at any time during the year; and
$0 for married persons filing separately who lived together during the year.
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Wink Inc. | Enrolled Agents | 2701 Troy Center Dr, Ste 430 | Troy | Michigan | 48084 | Tel: 248-816-1220 | 800-276-8319
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