8568 / Are Social Security and railroad retirement benefits taxable?

A taxpayer must include a portion of benefits in gross income if the taxpayer’s modified adjusted gross income (in most cases the taxpayer’s adjusted gross income) plus one-half of the Social Security benefits (including tier I railroad retirement benefits) received during the taxable year exceeds certain base amounts. The amounts that are required to be included in gross income are taxed as ordinary income. As the taxpayer’s income in addition to Social Security benefits increases, so does the amount of those benefits that are taxable. However, the amount of benefits that are taxable can never exceed 85 percent of the total benefits received by the taxpayer.

To calculate the extent to which Social Security benefits are taxable, add one-half of Social Security benefits received during the tax year to all other income including wages, interest (including tax exempt interest), dividends, taxable pension distributions, etc. (modified adjusted gross income).¹ Next, compare that amount with the applicable base amounts, which are the following:

$25,000 for taxpayers filing as single, head of household or qualifying widow(er)s;

$25,000 for married taxpayers who file separately and live apart from the other spouse for the entire tax year;

$32,000 for married taxpayers filing jointly; or

$0 for married taxpayers who file separately, but live with a spouse at any time during the tax year.²

If the modified adjusted gross income plus one-half of Social Security benefits is equal to or less than the base amount, no portion of the Social Security benefits are taxable.