How Social Security is Taxed | Made Easy! 

Increasing tax rates are the reason I rolled over my 401k to a Roth. I don’t want to be 59 paying taxes on current income on withdrawals made from my retirement account.

Its worse here, our economy is like a flailing fish, fighting for its life. The normal state of the U.S. economy is actually very bad. Because of this it goes into convulsive spasms fighting to grow any way it can out of desperation. Tricks, gimmicks, rule changes try to stimulate the economy and prevent it from falling but they only bring temporary relief to people since, when you factor in inflation we are declining.

Thank you. My wife and I were on active duty in the US Navy. She died on active duty and is buried with full honors in Arlington National Cemetery. I retired at nearly 30 years on active duty In the Summer of 2021. I decided that I would take survivor benefit, waiting until age 70 to take mine. I would have asked her to do the same so she could be financially independent. I miss her terribly. I thank you for all of your videos.

Simple straightforward example, thank you. This is the first time I’ve ever heard of choosing lowest of 3 calculations like in your example. Most content just states the income thresholds.

Why is social security even taxed! Especially, when the tax table is not even adjusted for inflation.

Geoff, With the the 3 tests, do you get to choose between them and of course select the lowest outcome as in this scenario where only $16200 was subject to tax? I assume that amount is then added to AGI to determine your final tax?

I am going to watch this several times until I can figure out that 3 option thing.. this is nuts!! I have prepared and filed my own taxes since I was 16. Even with property, deductions, etc.. nothing seems as convoluted as this!!

Great information. They never say how much money is put into the system when someone passes away or even if it is put back into the system. Unfortunately there are quite a few people that paid into SS all of their working lives but never got to receive any payments from what they paid in because they are no longer with us. It is bad enough that we pay into our own SS throughout our working years, then when we no longer can work or just don't want to because of various reasons, we still have to pay taxes on what we paid in.

Thank you so much. I had never heard of the tests before and have not found a lot of info on the net concerning the tests. I have always done my own taxes and may have missed this. Fortunately for me I have not yet started collecting and will probably wait til FRA. Great channel!

Geoff - Thanks for saying, "may owe" a lot. The most valuable words in the tax code on this subject are, "may owe" and "up to". Most YT videos on this subject wrongly state that if your combined income falls in either the 50% or 85% range that your entire SS benefit is taxed at 50% or 85% which is far from the truth. Your worksheet makes this much less complicated.

All I can say right now is...wow... First, thank you for trying to explain this to the average tax payer out here. This is the first time I've looked into taxes on Social Security, and all I can think of is how insane the system seems to be. Why on Earth are there so many scenarios for the average person? We all know if you have enough money, none of this is even applicable, which makes it even more frustrating. I just retired last year at 59 years old. I was planning on retiring at 62, but there were multiple circumstances that allowed me to retire even earlier, saving my sanity in the process. One of these is the fact I have a pension to draw from which takes care of my expenses every month. I still have a 401k and Social Security to start drawing from, and I'm still making decisions for those withdrawals. Geoff, even with all of the information you just supplied in this video, my situation was not covered. You stated the single amounts, and the married, filing jointly amounts, to apply the three tests to when figuring your taxes. However, I have re-married in the past couple of years, but my wife and I do not file jointly. How does this information apply in my case?

You are awesome, Geoff! Thanks so much for your useful information.

Thanks so much Geoff!! Great way to start my day having my first year of claiming taxes on my SSR off of my mind!

Thanks for trying to explain this very confusing taxation. I hope my tax software encompasses it into the tax calculation.

thank you for this video Geoff! love the detailed explanation and example you’ve shared, learned something today 😊

Based on the comments, there seems to be some confusion as to the 35, 50, and 85 numbers. This isn't the tax RATE, but rather the amount of income to be taxed. In the example given, if this couple is over 65, they still have their standard deduction to use. The AGI would be 52,200 and deduction is 27,700 for a taxable income of 24,500. Marginal rate is 12%. So, what started out as 40,000 in SS benefits, is reduced to 16,200 taxable, for a total tax of 1,944 on those benefits.

Nicely explained! About a month ago I used my own spreadsheet version I created a few years ago to calculate our tax free Roth conversions for 2022 before the end of the year. I love that thing as I can dial in our taxes perfectly to maximize the form 8880 retirement savers credit and any surprises can be corrected with our new IRA/Roth contributions made post 2022 but before April 18th and credited as 2022 contributions. IRA contributions to lower our taxable income and increased Roth conversions to increase it. Once done with our Roth conversions it's on to stepping up the cost basis in our taxable investments just in case congress wants to change the 0% LTCG/QD rate of the 12% bracket or if we find ourselves in a higher bracket later in life. I find that in this stage of our lives (and at every stage thus far) our spending or more to the point the lack thereof drives our tax plan/lack of tax liability more than anything. Cheers!

Exactly what I was looking for. Thanks!

This is great video. Thanks for showing the three tests.

Really good to know. You have expertly explained it to simple calculations. Thanks for another wonderful video!

My financial advisor Mr. Rahul Gupta employs the Hammer candlestick pattern, which is a single candlestick pattern that develops at the end of a decline and indicates a bullish reversal, to multiply earnings for me.

Makes my mind spin, but, thank you!

So helpful..I appreciate the way you make the confusing easy to understand!

Great explanation. Cleared up my confusion.

If anyone's interested, I followed Geoff's calculations in Excel for my 2023 amounts as well as my estimated 2024 amounts. The excel results matched the Social Security Worksheet from H&R Block 2023 software. The 2023 values resulted in Test #1 while the 2024 values resulted in Test #3. THANKS GEOFF!!

Can you share the "simple" worksheet you said was downloadable?

Did not know about the 3 tests Great Vid.... does Tax filing Software calculate this ?

Thank you mr Schmidt

Excellent example - very helpful!

Good video. It's a shame that any of your SS is taxed, but it is good to see the calculations to minimize the taxable amount.

Does a tax program like turbo tax have these calculations and recommend the best option?

Thank you for posting this helpful Video. I really enjoy and appreciate your videos and your channel.

What a good video! I hope more people find this one!

Thanks much. Practical, usable subject matter.

Thank you, I've never seen options #2 or #3 before. Very helpful

Excellent presentation! Thank you.

Hi, thank you for the presentation - the link to the worksheet no longer works - I was interested in checking it out - thank you

Good video ! If I would have been able to keep all the money I paid in SS tax in my job over the last 40 years I wouldn't need SS. A failed system

Thank you for the information. I was unaware of option 2 and option 3. After the video I looked on the SSA website and could not find this information. Would you post a link to where this information is? The link you posted to the SSA only explained option 1.

Great explanation Geoff of a confusing topic.

Thanks for the new knowledge!

Thanks for the video. It seems it is better to pay into Roth than Non-Roth so as to avoid distributions jack up the "Combined Income".

Thank you. This was incredibly helpful.

Or you could just use the worksheet on page 32 of the 2022 instructions for form 1040. It is actually very simple and Geoff's three tests are built into it so that you don't even notice them.

Hi Geoff, the link to the worksheet appears to be broken.

If you use software like Turbo Tax to do your taxes, does it calculate these numbers for you and figure out the best one? Or is this something I need to do manually?

Thankyou for Great information

I'm in the "0%" bracket for long term capital gains, and also get SS. When the calculations are done, those LTCG's aren't really tax free. They only become tax free after 85% of the SS is already taxed and before the tax bracket ceiling is reached.

That is kind of complicated. But well explained. Are Medicare premiums deducted from Social Security benefits before taxes?

I've tried a couple of different browsers, but have been unable to download the worksheet??

This was helpful. Thanks!

One should assume that all pension plans are already taxed, that would also include Social Security which for many they may need to pay quarterly due to their bank's report to the IRS.

Good info. I had never heard of these 3 tests. I looked for worksheets (including from the IRS). They talk about the thresholds but then say you owe 85%. Where do I find these 3 tests? Would I be able to hire you for tax prep? Your website didn't mention anything about it.

Is the tax owed calculated on the amount over the threshold, or the entire amount? Thank you.

Question: with the three different tests: options you gave, if I use the govt. tax program how does it figure out which one to use? Does it use the one that benefits me or the one that benefits the govt.?

I just use the worksheet (page 32 of 114 in the 2023 1040 instruction book). From what I see, there is only one unique answer for a given situation, i.e., no picking btwn Case 1, Case 2, Case 3, etc.

Thanks for video. When I retired I received a pension from work. At 65 I started taking my SS payment. If half of my SS payment plus my pension (which is already having federal taxes taken out) equal $31,000 / yr, can you help explain to me how much I will be taxed? Any help would be appreciated as this is way over my head. Thanks.

I don't see a test 2 as an option. IRS does have a worksheet for the calculation which is basically test one or three but your examples are more straight forward.

It's not easy, buy you certainly helped! Thanks.

So you just get to choose the lowest number and put that number on the tax form where it asks for your yearly SSA payments instead of your ACTUAL yearly SSA payments. If that’s so, why doesn’t Turbo tax calculate it for you?

You indicate that "tax free income" like municipal bond income must be included. Would that also include distributions from a Roth IRA?

Geoff - I find it interesting that you use the correct term, "combined income". Many other financial professionals call it, "provisional income". Do you have any idea where the term "provisional income" originated and why it has such widespread use?

IRS form W-4P is written in Klingon. Please do a video on this new IRS nightmare. Thanks

Could you explain military retirement as income for SS?

You’re the best! Thank you ❤

I just started receiving SS benefits this year-2024. I did a pro-forma tax return using my actual 2023 return and adjusting it for expected SS payments this year and submitting quarterly Federal Income Tax estimates to the IRS. My question is will tax preparation software like Tax Cut and Turbo Tax automatically select the best option for you?

On 3 test slide, where did test 2 come from? I have never heard of this

Do you have a video that explains the taxable amount one arrives at by combining "Adjusted Gross Income" plus "Taxable Amount of Social Security Benefits"

Thx, I am cornfused. Dats Y I have an accountant who worked for the IRS.

Any government entity that has a 100,000 page website needs to be simplified, streamlined and downsized. How much of our income taxes go JUST to keeping this going?

Thank goodness that tax software handles these calculations (and selects the most correct--the least amount--of tax due). [at least, I hope that's happening...]

Does turbo automatically calculate which of the 3 options is best.

These formulas appear to be designed to benefit those who have more income coming from social security than they do other sources. Correct?

Love you videos. But worksheet link = 404 error: Page not found

I think your use of the term Adjusted Gross Income is inaccurate when calculating combined income. Since AGI (Line 11 Form 1040) includes the social security benefit, it would be better to use the term Other Earned Income as the SS website does. Combined Income = Other Earned Income + 50% of SS benefit. Thoughts?

Where did test 3 come from? Seems like everyone would benifit from thar. I didnt see that one on the reading I was doing.

Thanks Geoff!

I'm confused, do u use Combined income or AGI.

What do you mean combined in for a single. Is it the SSI and if I work part time.?

I am retiring shortly at age 62 and will start receiving my SSi benefit immediately while my wife will continue to work until age 65. Our income sources will be my SSI, my wife's W-2 income and monies derived from the rental real estate we own. My question is whether or not the rental income will used in the SSI taxation formula?

My husband and I are both on Social Security and take out 15% for each of us monthly. We had to get a new roof so I took my pension and paid the 20% interest rate to cash it out and we’re able to pay for the roof plus some of our savings. Will us taking out 15% monthly help reduce the amount we will pay at tax time?

If I start receiving SS in June, does the money I already received from my Ira (ytd) count towards my taxes. Or does that start when I start to get my checks ?

I have not seen all three tests anywhere before. Most people explaining this either do Test 1 and Test 3, or just Test 3, but with 85%. Only one other site did Test 3 with 35% (and they also had Test 1 with 85%). I've never seen Test 2 before with 50% of the total SS payment. It is very hard to find where the accurate source of information is when all these RU-vidrs are explaining it different ways. Most people I've seen so far just explain it with Test 3 with 85%. Update: I found the IRS Worksheet 1 and examples where this is done (Pub 915). The reason why 35% is used in Test 3 is because 50% is used for the entire amount subtracting the lower threshold, so you only need 35% more for the upper threshold to make 85%. Test 1 and Test 3 are in there by default and the lower amount is chosen. Not sure if Test 2 is in there or it's a different Worksheet. There are nuances when lower income levels are used when trying to compare it to other RU-vidr's videos. It didn't always tie out to the formula above exactly, but I may have missed something, or there may be assumptions I'm not using.

Thanks, Geoff, fine video. I've been reading over many different pubs trying to figure this out. You make it simple. One question: Are you, as a taxpayer, able to choose which test (1,2, or 3) you want to be taxed at or will the IRS always default to the least of the 3 amounts for your tax liability? Appreciate the vid....

The link is dead

your link to the work sheet does not work.

Great video. Does a military pension count towards combined income? Thank you!

So only half of your SS payments are counted towards your total taxable income ?

Hello, quick question, I am a 62 yo retired Federal employee. I get a monthly annuity and have Federal tax taken out of that. My wife still works and has Federal tax (10%) taken out each paycheck. This past year we got a Federal tax refund of over $2k. Since I turned 62 two months ago, my SSA Supplement ended. Starting this month I will begin receiving my Social Security benefit payment which works out to be about $700 more than my SSA supplement was per month. My question is, since my wife and I received a good amount from last years Federal tax return, am I required regardless to have additional Federal tax taken out of my Social Security benefit even if I think we are paying adequate Federal Taxes on our income? Thank you.

Geoff: what about the so called "SS Tax Torpedo". For higher earning SS recipients? Is there a hight rate for SS compared to regular ordinary income? Thanks in advance.

Is income tax on social security calculated differently than on pension payments?

Geoff - 9 years till retirement and I've creating a retirement earnings, costs and taxes workbook based on what I currently anticipate as where my wife and I will be. In this workbook I've created a spreadsheet with the formulas for the 3 tests on calculating social security taxes. The workbook will update automatically when I change the yearly variables, such as new salaries, projected social security benefits, tax thresholds, etc. While I'm glad you created the worksheet for us to use to do this I've been looking for where on the IRS and/or Social Security websites that this test is available for retirees to use. This way I can look every year to see if the rules have changed so I can adjust my spreadsheet(s) accordingly. Can y ou tell me where I can find this?

What if we are working now and earning high income but retire mid-year and begin pulling Social Security. Is Social Security taxed at that mid-year earning point or would it include my income from the first 6 months of the year. If the latter, would it be best to delay Social Security to the start of the new year.

I'm 66 and getting ready for a move to SE Asia and finding a great wife. Pretty cool that I'll get a break on taxes as I can use combined income.

So...on your tax form you actually select on of these test?

Greetings Geoff what if you are reporting your overage in income a job to SSI and the money is being deducted monthly for every $2.00 over they deduct $1.00 do we follow the same process and will that change what is taxable? I would appreciate a reply in a video if possible. Thanks for this current video.

what about married filing single ? which bracket???

On his 3 test slide, I think AGI is a typo. It should be other income except for SS or something. AGI is an amount that contains taxable SS already, so it doesn’t make sense 😊

When you say combined income of less than 32 k, is that AGI?

I can't find that tax form for computing the ss tax