Tax Filing Help

Taxes on Social Security Income

Social security benefit is among the most confusing item when filing tax returns. Many people receive social security benefits and have difficulties deciding whether to include social security as taxable income or as non taxable income. The tax laws on social security benefits do not make it any easier since some parts of the social security benefits are taxable while others are not. Taxes on social security income are explained below.

Is social security a taxable income?

First of all social security benefits are not earned income. Social security benefits are unearned income as are interest income and dividends. Social security benefits is a line on the IRS tax form 1040 used to calculate total income or gross income. However, not all social security benefits are included. Some parts of the social security benefits are not taxable income while some parts are.

Are social security benefits included in...
Earned income No
Taxable income Part may be
Gross income Part may be
Unearned income Yes
Non taxable income Part may be

How to know which part of the social security benefits is taxable income?

When a taxpayer receives social security benefits, the tax form SSA-1099 is usually sent out which is the social security benefit statement. In Box 3 of the SSA-1099, the total amounts of social security benefits are shown for the tax year. Box 5 of the SSA-1099 tax form shows the net social security benefit amount for the year and some of this amount shown in Box 5 may be taxable income.

When filing tax return, the taxpayer has to enter all the amounts pertaining to social security benefits. The amount of social security benefit shown in Box 5 will be used to calculate the amount of social security benefits that need to be included in taxable income and taxed by the IRS.

Basically social security benefits are unearned income, not earned, that are taxable income for some high income taxpayers but nontaxable income for many taxpayers. The tax form will show you how to calculate the taxable portion of the social security benefits on appropriate worksheets. If you are using tax software such as Turbo Tax or Tax Cut, the software will automatically calculate the taxable portion of your social security benefits. Use tax worksheets to determine the taxable portion of social security benefits and do not include the whole benefit amount as taxable income.