Benefits not Taxable

• If a taxpayer's only income is from social security the benefit is not, in general, subject to federal income tax. Total income includes non-taxable interest from tax-fee bonds.
  
  

Total Income

• For taxpayer's who are married and filing a joint tax return, the income of both spouses must be included in total income to determine if social security benefits are taxable. This applies even if only one spouse received social security benefits during the year. Taxation of benefits is determined by comparing total income plus one-half of the social security benefits received to a base amount.
  
  

Base Amount

• The base amount for determining taxation of benefits depends on tax filing status. For the 2009 tax year the base amount for taxpayers with a filing status of single, head of household or qualifying widower is $25,000. For a filing status of married filing jointly the 2009 tax year base amount is $32,000. For taxpayers filing as married-filing-separately the base amount is $25,000 if the taxpayer did not live with their spouse for the entire year; $0 if the spouses lived together at any point during the year.
  
  

Total Income Calculation

• To determine total income a taxpayer must add one-half of any social security benefits received, plus any other taxable income (pension, wages, retirement plan distributions, for instance), plus tax-exempt interest income.
  
  

Determining if Benefits are Taxable

• Taxpayers should compare their total income to the appropriate base amount to determine if any portion of their benefits is taxable. If there is a taxable portion then the taxpayer needs to include this on their tax return. The amount to include depends on the taxpayer's total income; a worksheet, included with Form 1040 or 1040A instructions, should be completed to determine the amount of social security benefits to include in income.
  
  

Limits

• The maximum portion of social security benefits that can be included in income is 85 percent. The 85 percent level only applies to taxpayers whose total income, including one-half of social security benefits exceeds $34,000; $44,000 for taxpayers with a filing status of married-filing-jointly. For the majority of taxpayers not more than 50 percent of any social security benefits will be subject to federal income tax.