2025 is already knocking on our door and so is the tax calendar, which is about to open to file your 2024 taxes. Even though we may think they are useless, every year, millions of Americans depend on Social Security as their main source of income (think now about retirees and people with some type of disability who can no longer take care of themselves when it comes to working).
That’s why filing your taxes (even when it’s not mandatory for you) could make a difference in your financial situation. Let’s get to the data: the Social Security Administration paid out more than $121.4 billion to nearly 68.1 million beneficiaries (last August 2024 alone!!). But a portion of these beneficiaries could be subject to taxes depending on their income level and marital status. And since 1984, some users with income above certain thresholds have had to pay taxes on their own benefits.
We’re going to tell you below what happened and how this decision can benefit you (since you may be entitled to a refund or qualify for some tax credits this year), so stay tuned and we’ll tell you!
How do I know if my Social Security benefits are taxable?
Well, it’s very simple, even though it may seem confusing. We’ll explain it to you step by step. First, you must add up half of your Social Security benefits and any other income you have (for example, wages, self-employment income, interest or dividends). Then you will have to compare this total with the base amount assigned to your marital status by the IRS. The base amounts are as follows:
$25,000 if you are single, head of household or surviving spouse
$25,000 if you are married and file a separate return or lived apart from your spouse all year
$32,000 if you are married and file a joint return
$0 if you are married and file a separate return but lived with your spouse at some point during the tax year
What if I exceed the base amount?
If your amount (all added up) exceeds the base number, you still have to pay taxes:
- If you are single, if your amount is between $25,000 and $34,000, up to 50% of your benefits could be taxed. If they exceed $34,000, up to 85%.
- If you file a joint return and your combined income is between $32,000 and $44,000, 50%, if they exceed that last figure, up to 85% of your benefits will be taxed.
- If you are married and filing separately, there are two options: if you lived with your spouse, it is likely that all of your benefits will be taxed; and if you lived apart during the tax year, your benefits will be treated as those of a single taxpayer.
What do I do if I have to pay taxes?
The Social Security Administration will allow you to withhold taxes directly from your monthly payments. This will help you avoid unpleasant surprises when you have to file your return for the year 2024. You will have to declare your income if:
- You are over 65 years old and single and your gross income exceeds $14,700
- You file a joint return with a spouse who is 65 years old or older and your combined gross income exceeds $28,700
- You file a joint return with a spouse under 75 years old and your combined gross income exceeds $27,300
Where to report taxable profits?
The taxable portion of your profits must be reported on line 6b of Form 1040 or 1040-SR.