Do Social Security Recipients Need to File Taxes?

Tax Time is Just Around the Corner!

With tax time upon us, most of my posts will focus on Social Security income and taxes.

Many Social Security recipients are confused on this issue. I have spoken with several people who think that they are exempt from paying any taxes at all, or don't need to file because their only income is from Social Security. They also believe that they are not required to pay taxes on additional income unless that income is in excess of the additional amounts that Social Security allows for individuals and couples. Unfortunately that is not entirely true.

Depending upon the state in which you live, you may be required to pay state and/or local taxes on your Social Security income. However, there are many states do not require Social Security recipients to pay local taxes. I suggest you check with your state tax board before making that assumption. If you are required to pay any type of state or local taxes, keep in mind that the Social Security Administration is only authorized to withhold Federal taxes. In determining whether or not Social Security recipients need to pay taxes on their income, the IRS states that individuals can make up to $25,000 yearly (in Social Security benefit payments, plus any other income); and couples can earn up to $32,000 yearly without being required to pay taxes.

If you are under the retirement age of 65 you can earn up to $14,160 per year in excess of your Social Security benefit payment amount as an individual; and $37,680 per year for couples without any reduction to your Social Security benefit amount. Any earned amounts in excess of those mentioned above will result in a reduction in the amount of your Social Security benefit by $1 for every $2 earned. For example, if are an individual and you earn $1,000 over the $14,160 allotted for individuals, that brings your additional income to $15,160 and your Social Security check will be reduced by $500.

Any income that is derived from self-employment is subject to taxes. Profits from self-employment in excess of $400 yearly must have Social Security and Medicare taxes deducted and must be reported when you file your personal income tax return.

With all the tax credits available, it’s a good idea to file a yearly tax return even if none of the above scenarios apply to you. Last year, with Social Security benefits and a couple of months of temporary work (which came to around $7,000), I got a return of $822; and received more than $500 the year before.