Here’s one of the most frequently asked questions we get on the new tax law: Were any changes made to the federal taxation of Social Security benefits? No. The rules remain intact. For many Social Security recipients, the benefits aren’t taxed. Others are not so lucky and may have to pay income tax on up to 85% of the benefits. Let’s go over the rules. First, you need to figure your “provisional income.” That’s your adjusted gross income plus tax-free interest from municipal bonds and 50% of your Social Security benefits. If your provisional income is below $25,000…
$32,000 on a joint return…then the benefits are tax-free. If your provisional income is between $25,000 and $34,000 on a single return or between $32,000 and $44,000 for joint filers, then half the benefits are taxable. For provisional income over $34,000 for singles…$44,000 for married couples…up to 85% of your benefits are taxable. Don’t assume your state follows federal law. Many don’t tax Social Security.