Figuring Taxes On Social Security Benefits

If you started receiving social security benefits in 2010, you're probably wondering how that's going to affect your tax return. Are benefits taxable?

In most cases, yes -- but in some cases, no. The answer will depend on your total income and marital status.

Generally, if Social Security benefits were your only income for 2010, your benefits are not taxable and you probably do not need to file a federal income tax return, according to the Internal Revenue Service (IRA). If you received income from other sources, your benefits will not be taxed unless your modified adjusted gross income is more than the base amount for your filing status. More about that below.

Your taxable benefits and modified adjusted gross income are figured on a worksheet in the Form 1040A or Form 1040 Instruction booklet.

Formula

You should receive a Form SSA-1099 which will show the total amount of your benefits. The information provided on this statement along with the following formula from the Internal Revenue Service (IRS) will help you determine whether or not your benefits are taxable.

First, add one-half of the total Social Security benefits you received to all your other income, including any tax exempt interest and other exclusions from income.

Then, compare this total with the base amount for your filing status. If the total is more than your base amount, some of your benefits may be taxable.

The 2010 base amounts are:

• $32,000 for married couples filing jointly.

• $25,000 for single, head of household, qualifying widow/widower with a dependent child, or married individuals filing separately who did not live with their spouses at any time during the year.

• $0 for married persons filing separately who lived together during the year.

 What else have you earned?

If part of your benefits turn out to be taxable, how much is taxable depends on the total amount of your benefits and other income. Generally, the higher that total amount, the greater the taxable part of your benefits.

Generally, up to 50 perecent of your benefits will be taxable. However, up to 85 percent of your benefits can be taxable if either of the following situations applies to you:

• The total of one-half of your benefits and all your other income is more than $34,000 ($44,000 if you are married filing jointly).

• You are married filing separately and lived with your spouse at any time during 2010.

If part of your benefits are taxable, you must use Form 1040 or Form 1040A. You cannot use Form 1040EZ. More information is available in IRS Publication 915.