This blog post is the second of a trilogy having to do with Social Security. The first is about Social Security Benefits; the third is, Will Social Security Be There When I Retire?
Oh yes. Many new Social Security retirees get a big surprise when they learn about the taxation of Social Security benefits. The original framework was introduced in 1983 under President Reagan (the Social Security Amendments of 1983), and expanded in 1993 under President Clinton, who added the 85% tier. Previously, Social Security benefits did not count as taxable income at all.
Provisional Income
The formula used to determine how much of your benefit is taxable is the provisional income formula. It boils down to this: add all of your income together — wages, business earnings, tax-free bond income (yes — non-taxable income is included in this formula), IRA distributions, everything — plus ½ of your Social Security benefit. If the result falls into the following ranges, then that portion of your Social Security income gets taxed along with everything else.
Married filing jointly — If provisional income is:
- Below $32,000 → no Social Security benefit is taxed
- $32,000 to $44,000 → up to 50% of Social Security is taxed
- Above $44,000 → up to 85% of Social Security is taxed
Single filers — If provisional income is:
- Below $25,000 → no Social Security benefit is taxed
- $25,000 to $34,000 → up to 50% of Social Security is taxed
- Above $34,000 → up to 85% of Social Security is taxed
Important note: These thresholds were set by statute in 1983 and 1993 and have never been indexed for inflation. As incomes have risen over the decades, more and more Social Security recipients have found themselves subject to taxation on their benefits. The OBBBA (signed July 2025) did not change these thresholds, though it did add a new $6,000 additional deduction for taxpayers age 65 and older, which partially offsets the tax impact.
For a married taxpayer filing jointly, does 85% mean that 85% of the Social Security benefit is taxed away? Fortunately, no! It means that up to 85% of the Social Security payments will be added in with all of the other taxable income. Here’s an example:
A married couple has this income:
- $18,000 pension income
- $6,000 IRA distributions
- $12,000 municipal bond interest (non-taxable)
- $24,000 Social Security income ($2,000/month)
Apply the provisional income formula: $18,000 + $6,000 + $12,000 + $12,000 (½ of SS) = $48,000. Since $48,000 exceeds $44,000, up to 85% of Social Security gets added to other taxable income. Although gross income totals $60,000, the taxable income is:
- $18,000 pension income
- $6,000 IRA distributions
- $20,400 Social Security income (85% of $24,000)
Total taxable income: $44,400 — which is $15,600 less than gross income because municipal bond income is tax-free.
With the 2026 standard deduction of $32,200 for married filing jointly, the federally taxable amount is $44,400 − $32,200 = $12,200, and the federal tax on that amount is approximately $1,220. For a couple age 65 or older, the new OBBBA $6,000 senior deduction would reduce taxable income further.
There is actually a little more to this formula than I’ve specified here, but as the saying goes, this is close enough for government work.
For more information, please see Social Security Benefits, and Will Social Security Be There When I Retire?
