It wasn’t until 1984 that Social Security became taxable.
It came at a time when the Social Security trust fund was dangerously close to running dry, and the solution Congress proposed included taxing benefits
And yet, the taxation of Social Security benefits comes as a surprise to many. If you’re unclear as to how benefits are taxed, you’ll find the answers here. After all, planning for retirement requires knowing how much money will remain after taxes are deducted.
When Social Security benefits are taxed Whether your Social Security benefits are subject to taxes depends on what the IRS calls your “combined income.” Combined income includes: – Your adjusted gross income (AGI) – One-half of your Social Security benefits Based on this combined income, you may owe federal taxes on up to 85% of your benefits. In other words, if your monthly benefit amount is $1,000, up to $850 of that amount may be taxed by the federal government. While 42 states don’t tax Social Security, these eight states may tax part of your benefits: – Colorado – Connecticut – Minnesota – Montana – Utah – Vermont Each state has a different set of parameters and income limits, and if you are taxed, it will be at your state’s rate. 2026 income thresholds for federal taxation Single/head of household – Combined income below $25,000: No taxes on benefits. – Combined income $25,000-$34,000: Up to 50% of benefits may be taxable. – Combined income above $34,000: Up to 85% of benefits may be taxable.