The starting point: combined income
The IRS calculates the taxable portion of Social Security using a number called combined income. It is defined as: adjusted gross income (AGI) plus nontaxable interest plus half of your Social Security benefit. Note that combined income includes only half of your SS benefit, not all of it.
Once you have combined income, the IRS applies two thresholds. The thresholds depend on filing status.
For individual filers
- Combined income under $25,000: 0 percent of benefit is taxable
- Combined income $25,000 to $34,000: up to 50 percent is taxable
- Combined income above $34,000: up to 85 percent is taxable
For joint filers
- Combined income under $32,000: 0 percent taxable
- $32,000 to $44,000: up to 50 percent taxable
- Above $44,000: up to 85 percent taxable
A worked example
Consider a single retiree with $30,000 in annual Social Security benefits, $5,000 in pension income, and $200 in nontaxable municipal bond interest. AGI is $5,000 (the pension; SS is not in AGI yet). Combined income equals $5,000 + $200 + (0.5 × $30,000) = $20,200. That is under the $25,000 first threshold, so 0 percent of Social Security is taxable for federal purposes. They report the $30,000 on Form 1040 line 6a but the taxable amount on 6b is $0.
Now consider the same retiree with $20,000 in pension instead of $5,000. AGI is $20,000. Combined income: $20,000 + $200 + $15,000 = $35,200. That crosses both thresholds. The IRS worksheet on Form 1040 instructions calculates a taxable Social Security amount of about $13,170, or 43.9 percent of the full benefit.
The 85 percent cap is real
It is never more than 85 percent of your gross benefit. The IRS used to discuss raising this cap to 100 percent in the 1990s reform debates, but the cap has not moved since 1993. So even at very high incomes, 15 percent of your Social Security benefit is always tax-free.
State taxes are a separate issue
Twelve states tax Social Security at the state level under various rules: Colorado, Connecticut, Kansas, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia (West Virginia phasing out by 2026). Missouri and Nebraska repealed Social Security state tax in recent years. Thirty-eight states and the District of Columbia do not tax Social Security at the state level at all. Your state of legal residence on December 31 determines which rule applies.
Voluntary withholding from your check
If you expect to owe federal tax on your benefit, you can have SSA withhold from each payment. File Form W-4V with SSA. You can choose 7, 10, 12, or 22 percent of your gross benefit to be withheld. The withholding shows up on your Form SSA-1099 in January and reduces what you owe on Form 1040.
Most retirees who expect to owe federal tax find that 7 or 10 percent withholding is sufficient. If you have significant pension or RMD income, 12 or 22 percent may be more appropriate. Withholding does not change your gross benefit, only your net deposit.
Why the thresholds have not moved since 1984
The $25,000 and $32,000 thresholds were set when the federal tax on Social Security was created in 1983, with the higher tier ($34,000 / $44,000) added in 1993. Neither set of thresholds has been adjusted for inflation. As a result, an income that was high-middle-class in 1984 is now ordinary, and a far larger share of recipients owe tax than Congress originally projected. Bills to inflation-adjust the thresholds are introduced almost every session but rarely advance.
Bottom line for 2026 planning
If Social Security is your only income, you owe no federal tax on it. If you have any pension, IRA withdrawal, or capital gains, run your numbers through the Form 1040 Social Security worksheet. The result is one of three answers: 0 percent taxable, up to 50 percent taxable, or up to 85 percent taxable. Plan your withholding or quarterly estimated payments accordingly.