It's Getting Harder and Harder to Hide from Social Security Benefit Taxes. How to Prepare If You'll Owe Them in 2025.
The average Social Security benefit will reach $1,976 per month in January 2025. It could crack $2,000 per month for the first time as the year continues. While these larger checks are welcome, they’re not always enough for the retirees who depend on them.
Part of that has to do with inflation, which has hurt Social Security’s buying power. However, federal income taxes on seniors’ Social Security benefits play their part as well. Below, we’ll look at why and what to do if you expect to owe them in 2025.
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How do Social Security benefit taxes work?
The federal government taxes the Social Security benefits of some retirees if their provisional income — their adjusted gross income (AGI), plus nontaxable interest from municipal bonds and half their annual Social Security benefits — exceeds certain thresholds for their marital status as shown in the table below:
|
Marital Status |
0% of Benefits Taxable If Provisional Income Is Under: |
Up to 50% of Benefits Taxable If Provisional Income Is Between: |
Up to 85% of Benefits Taxable If Provisional Income Exceeds: |
|---|---|---|---|
|
Single |
$25,000 |
$25,000 and $34,000 |
$34,000 |
|
Married |
$32,000 |
$32,000 and $44,000 |
$44,000 |
Source: Social Security Administration.
This doesn’t mean you could lose up to 85% of your benefits. It means you could pay ordinary income tax on up to that amount. But giving up any of your benefits can be difficult, especially if you don’t have a lot of personal savings.
These taxes used to be less common than they are now. Rising average benefits coupled with taxation thresholds that haven’t changed in three decades have forced more retirees to return a portion of their benefits to Uncle Sam every year.
Sometimes, it’s possible to avoid these taxes by reducing the amount you withdraw from your retirement accounts or relying more upon Roth savings. You’re usually allowed to withdraw these funds tax-free, so they don’t affect your AGI or provisional income. But this might not be feasible for everyone.
How to prepare for income taxes on Social Security benefits
If you don’t think you can avoid Social Security income taxes on your benefits, your next-best move is to prepare for them. It’s possible to set this money aside on your own and pay any amount due at tax time if you’d like. You may want to consult a tax professional to help you estimate how much you might owe.
Alternatively, you can ask the Social Security Administration to withhold a portion of your checks for taxes. You can do this by contacting the Social Security Administration over the phone or by visiting your local office. You can also download Form W-4 V from the IRS website and mail it to your local Social Security office.
Don’t forget about state income taxes on benefits
So far, we’ve only talked about federal Social Security benefit taxes, but a handful of states tax benefits as well. In 2025, you may have to worry about state benefit taxes if you live in one of the following places:
- Colorado
- Connecticut
- Minnesota
- Montana
- New Mexico
- Rhode Island
- Utah
- Vermont
- West Virginia
However, not all retirees in these states owe taxes. Each has its own formula that determines who owes these taxes. Check with your state department of taxation or a local accountant to learn how much, if any, state Social Security benefit taxes you could owe in 2025.