The amount of your Social Security that will be taxed is based on a concept called "provisional income" and it differs from the standard federal income tax brackets.
Provisional income = adjusted gross income (w/o SS) + nontaxable income (i.e. muni bond interest) + 1/2 of your SS benefits.
For example, if for the tax year you have a $10,000 pension, $1,000 in taxable interest, $2,000 in tax-free municipal bond interest, $10,000 for part-time employment, and $20,000 in Social Security benefits, your provisional income will be:
$10,000 + $1,000 + $2,000 + $10,000 + ($20,000/2) = $33,000
Here’s the breakdown for what’s includable in your federal taxable income:
- No Social Security (disability or retirement) is included in taxable income for single filers with provisional income less than $25,000 or married filing jointly with less than $32,000
- 50% of SS benefits included in taxable income for single filers with provisional income between $25,000-$34,000 or married filing jointly between $32,000-$44,000
- 85% of SS benefits included in taxable income for single filers with provisional income over $34,000 or married filing jointly over $44,000
Most states don’t tax Social Security benefits but be sure to check the particulars for your state. I hope that helps.
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