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At the start of every year, Americans are reminded of a daunting chore: filing their income tax returns. Collecting receipts and W-2s, choosing between tax software or using a preparer, wrestling with complicated forms and rules, and finally, reconciling with the IRS, all make for a strenuous ordeal.

But does everyone have to endure this process every year?

Perhaps not.

Not all individuals are mandated to file a federal tax return annually. Whether you’re required to file depends on factors such as your income level, age, and filing status. The returns you file this year pertain to the 2023 tax year and are generally due by April 15, 2024, for most taxpayers. Interestingly, if you’re exempt from filing, you could potentially save considerable time and effort. However, you may still want to file anyway, even if your only source of income in retirement comes from Social Security.

For retirees relying solely on Social Security income, federal income taxes on these benefits are typically not a concern. However, for those with additional taxable income streams—be it from employment, pensions, traditional IRAs, 401(k)s, or rental properties—taxes likely will be due on part of their Social Security income. (Fortunately, there’s some good news: At a minimum, at least 15% of your Social Security benefits will be exempt, which is more than you can say for most other common forms of retirement income.)

So, if you receive Social Security, will you have to file taxes? We’ll walk you through the basic federal income tax filing requirements, exceptions to the general rules, and situations requiring a return no matter what—as well as some reasons why you should file a return even if you don’t have to this year.

Are Social Security Benefits Taxable?


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Generally, Social Security income is taxable. This is true whether you’re receiving monthly retirement, survivor, or disability benefits from the Social Security Administration. Tier 1 railroad retirement benefits count as Social Security income and are generally taxable benefits, too.

However, you don’t have to pay federal income taxes on Social Security payments if your combined income is below a certain amount. In addition, Supplemental Security Income (SSI) payments, which are sent to qualified people with a limited total income, aren’t taxable. Disability payments received for injuries incurred as a direct result of a terrorist attack against the U.S. or its allies aren’t taxable, either. This includes Social Security Disability Insurance (SSDI) payments.

Summary of How Much of Your Social Security Benefits Are Subject to Taxation

Amount of Social Security Income Subject to Taxation
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Above, we provide a summary table of how much of your Social Security benefits are subject to taxation. Next, we discuss whether your Social Security benefits are taxable based on your provisional income.

Are Your Social Security Benefits Taxable?


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The first step in determining if your Social Security benefits are taxable is to calculate what’s commonly called your “provisional income” (a.k.a., combined income).

For most seniors, your provisional income is equal to the combined total of 50% of your Social Security benefits, modified adjusted gross income, and tax-exempt interest. If you’re filing a joint return, include amounts for both spouses.

— 50% of Social Security Benefits + Modified Adjusted Gross Income (MAGI) + Tax-Exempt Interest = Provisional Income

If your provisional income is low enough, none of your Social Security benefits will be taxed (i.e., 0%). However, this generally isn’t the case if you have taxable income in addition to your Social Security benefits (e.g., taxable distributions from a traditional IRA or pension).

If your provisional income is above the 0% threshold, then up to 50% or up to 85% of your Social Security benefits will be subject to federal income tax.

In all cases, the provisional income thresholds are based on your filing status.

Calculating Provisional Income: Half of Social Security Benefits

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When figuring 50% of your Social Security benefits, use the amount listed in Box 5 from each Social Security benefit statement (Form SSA-1099) you receive. (If you receive railroad retirement benefits treated as Social Security, you should receive Form RRB-1099.)

If you receive a lump-sum benefit payment for the current tax year and/or a previous year, include the full amount when calculating your Social Security benefits.

A couple’s Social Security benefits should also be combined if a joint return is filed.

Related: Don’t Believe These 17 Social Security Myths

Calculating Provisional Income: Modified Adjusted Gross Income

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For purposes of determining whether you must pay tax on your Social Security income, modified adjusted gross income means the adjusted gross income reported on your federal income tax return (Line 11 on your 2023 return), minus any tax deduction or exclusion for:

— Student loan interest

— Employer-provided adoption benefits

— Foreign earned income or housing

— Income earned by residents of American Samoa or Puerto Rico

If you’re claiming an exclusion of interest from Series EE and I U.S. savings bonds issued after 1989, don’t use the amount from Line 2b of Form 1040 when calculating your modified adjusted gross income. Use the amount from Line 2 of Schedule B (Form 1040) instead.

Related: 11 Ways to Avoid Taxes on Social Security Benefits

Calculating Provisional Income: Tax-Exempt Interest

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Nontaxable interest is reported on Line 2a of your federal return (Form 1040). This includes interest on municipal bonds. Tax-exempt interest is generally reported in Box 8 of Form 1099-INT, although certain types of exempt interest could be reported on other forms you receive, such as Form 1099-OID (for tax-exempt original issue discount) or Form 1099-DIV (for tax-exempt interest dividends from a mutual fund).

Examine Further: 5 Best Vanguard Retirement Funds [Start Saving in 2024]

If You Still Need Help Determining How Much of Your Social Security Income is Taxable

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The instructions for Form 1040 and IRS Publication 915 have worksheets to help you determine how much of your Social Security income is considered taxable income. The IRS also has an online tool to help you run through the calculations.

Top Tips: Best Schwab Retirement Funds for a 401(k) Plan

Beyond Social Security: Do I Have to File Taxes Based on My Income?


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Millions of people ask this question around this time each year. For the vast majority of Americans, the answer is “yes.” However, if your 2023 gross income is below a certain amount, you generally aren’t required to file a 2023 federal income tax return this year.

Use the table in the next slide to see if your 2023 gross income is above or below the basic tax filing requirements threshold for your filing status and age. If your income is at or above the threshold amount, you’re required to file a 2023 tax return this year. If your income is below the applicable threshold, you might be off the hook. (Note: The thresholds that apply if you can be claimed as a dependent on someone else’s tax return are discussed later.)

Get More: Best Vanguard Retirement Funds for a 401(k) Plan

Gross Income Thresholds Needed to File a Federal Return in 2023

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Gross income means total income received in the form of money, goods, property, and services that isn’t exempt from tax. This includes taxable income from sources outside the U.S. or from the sale of your primary home.

Only taxable Social Security benefits count as gross income for purposes of the filing thresholds. Since at least some Social Security income isn’t considered taxable income, people receiving Social Security benefits must first determine the taxable portion of their benefits before using the table above. (Most retirees who rely solely on Social Security benefits for their retirement income won’t have to file a return, since none of their Social Security income will be taxable.)

In addition, for married couples filing jointly, if you didn’t live with your spouse at the end of the taxable year and your gross income was at least $5, you must file a return regardless of your age.

Learn More: 5 Best Fidelity Retirement Funds [Low-Cost + Long-Term]

Relation to Standard Deduction

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As it turns out, the gross income thresholds are the same as the 2023 standard deduction amounts, except for married couples filing separate returns. That’s because the income thresholds are generally tied by law to the standard deduction and personal exemption amount for each filing status (the personal exemption is $0 from 2018 to 2025 thanks to the Tax Cuts and Jobs Act of 2017).

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Why? Because your taxable income will be reduced to zero, and you won’t owe taxes for the year anyway, if your gross income is less than the combined total of your standard deduction and personal exemption (when there is one).

Related: 7 Best Schwab ETFs to Buy [Build Your Core for Cheap]

However, the federal tax code doesn’t apply the same rules for married couples filing separate tax returns. Instead, the filing requirement is based only on the personal exemption, which is currently $0. The IRS bumped the threshold up to $5 so that separate filers with no income can avoid the tax filing requirements, but that’s still far short of the amount it would be if the standard deduction was part of the equation.

Related: What’s Your Standard Deduction This Year?

To read about the other filing requirements for submitting a tax return this year, we have a more in-depth article that answers whether you need to file a return.

Should I File Taxes Even If I Don’t Have To?


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So, you don’t have to file a tax return. That’s great! But what if the IRS owes you a tax refund? Would that make filing a tax return worth the time, money, and effort?

Related: When is Tax Day in 2024 [When Are Taxes Due]?

If you qualify for one or more refundable tax credits, the IRS could be sending you a sizable tax refund if you file a tax return this year. The same could be true if you had income tax withheld from your paycheck (or other income, such as Social Security benefits) during the year, or paid estimated taxes for the 2023 tax year.

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Related: What Tax Bracket Are You In?

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Perhaps the best way to lower your federal income tax bill is push yourself down into a lower tax bracket to reduce your tax rate. On the flip side, you certainly want to avoid getting kicked into a higher bracket and increasing your tax rate.

But, of course, under either scenario you need to have a good feel for where you are right now. For that purpose, check out the federal tax brackets and rates that will apply for your next federal tax return.

 

Related: What’s Your Standard Deduction?

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For most people, their largest and most important tax deduction is the standard deduction. However, the standard deduction amounts change every year to account for inflation. Plus, the standard deduction isn’t the same for everyone.

So, before start your tax return or jumping into tax planning mode, you’ll need to know how much your standard will be for the tax year.

 

Related: Capital Gains Tax: What You Need to Know

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Millions of Americans sell stocks, bonds, cryptocurrency, real estate, precious metals, and other types of investment property every year. However, if you sell investments during the year, you might owe capital gains tax on any profits.

The good news is that you’ll pay a lower tax rate on capital gains when compared to income taxes on wages, tips, and other “ordinary” income. On the other hand, there are a few landmines to avoid when you sell investment property. Get all the details with our guide to the capital gains tax.

 

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Rocky has been covering federal and state tax developments for over 25 years. During that time, he has provided tax information and guidance to millions of tax professionals and ordinary Americans. As Senior Tax Editor for WealthUp from Jan. 2023 to Feb. 2024, Rocky spent most of his time writing and editing online tax content.

Before working for WealthUp, Rocky was a Senior Tax Editor for Kiplinger, where he wrote and edited tax content for Kiplinger.com, Kiplinger’s Retirement Report and The Kiplinger Tax Letter. Prior to his time at Kiplinger, Rocky was a Senior Writer/Analyst for Wolters Kluwer Tax & Accounting. In that role, he managed a portfolio of print and digital state income tax research products, led the development of various new print and online products, authored white papers and other special publications, coordinated with authors of a state tax treatise, and acted as media contact for the state income tax group (where he was quoted as an expert by USA Today, Forbes, U.S. News & World Report, Reuters, Accounting Today, and other national media outlets). Before that, Rocky was an Executive Editor at Kleinrock Publishing, which provided tax research products for tax professionals. At Kleinrock, he directed the development, maintenance, and enhancement of all state tax and payroll law publications, including electronic research products, monthly newsletters, and handbooks.

Rocky has a law degree from the University of Connecticut and a B.A. in History from Salisbury University.