Will Your Social Security Benefits are Taxed?

If you receive disability, survivor, or social security retirement benefits, you may be wondering if your benefits will be subjected to federal income tax on your 2016 return. Taxation of these benefits is generally determined by your “provisional income”.

Provisional income (PI) is the product of a formula used for no other purpose than figuring out the taxable percentage of social security benefits. To compute your provisional income, total your adjusted gross income, any tax-exempt interest or similar non-taxable revenue, and one-half of your social security retirement benefits for the year. How much of your benefits are taxed depends on this "base amount."

* Joint filers with PI below $32,000 ($25,000 for single filers) owe no tax on benefits.

* Joint filers with PI between $32,000 and $44,000 ($25,000 and $34,000 for single filers) are taxed on a sliding scale that tops out at 50% of benefits received.

* Joint filers with PI over $44,000 ($34,000 for single filers) are taxed on more than 50% and up to 85% of benefits.

* Supplemental security income payments (SSI) are not taxable.

At Summit CPA we offer multiple resources to assist you with all of your tax and financial needs. Contact our office at 866-497-9761 to schedule an appointment with our advisors.