When it comes to taxes, they can often be confusing, especially for those who are new to retirement and collecting social security benefits. In this article, we’ll outline some general guidelines on how to calculate tax on your social security benefits.

1. Determine if your benefits are taxable

Not everyone has to pay taxes on their social security benefits. Your benefits may be subject to taxation if your total income, including social security and other sources, exceeds certain limits. To know if your social security benefits will be taxed, you must first calculate your combined income.

The formula to calculate combined income is:

Combined Income = Adjusted Gross Income (AGI) + Nontaxable Interest + (50% of Social Security Benefits)

2. Identify your tax bracket

Once you have calculated your combined income and determined whether your benefits are taxable, the next step is to find out which tax bracket you fall into based on the tax filing status:

a. Single, Head of Household, or Qualifying Widow(er)

– Up to 50% of benefits taxable: Combined Income between $25,000 – $34,000

– Up to 85% of benefits taxable: Combined Income more than $34,000

b. Married Filing Jointly

– Up to 50% of benefits taxable: Combined Income between $32,000 – $44,000

– Up to 85% of benefits taxable: Combined Income more than $44,000

c. Married Filing Separately (and lived apart from spouse for the entire year)

– Up to 50% of benefits taxable: Combined Income between $0 – $34,000

– Up to 85% of benefits taxable: Combined Income more than $34,000

3. Calculate the taxable portion of your Social Security benefits

Now that you have determined the percentage of your benefits subject to taxation, you can calculate the taxable amount:

a. Calculate 50% tax rate:

Taxable Amount at 50% = (50% x your total Social Security benefits) x 0.5

b. Calculate 85% tax rate:

Taxable Amount at 85% = (85% x your total Social Security benefits) x 0.85

4. Include the taxable portion in your income tax return

Be sure to add the taxable portion of your Social Security benefits to your reported income on your federal tax return (Form 1040 or 1040-SR). Keep in mind that some states do not have taxes on social security benefits, so check with your state’s tax agency for more information.

In conclusion, calculating the tax on social security benefits involves determining if your benefits are taxable, identifying your tax bracket, and calculating the taxable portion based on the percentage mentioned above. Remember that these guidelines are only general and that each individual’s situation is different. It may be helpful to consult with a tax professional for a more accurate evaluation of your specific circumstances.