How Uncle Sam Taxes Your Social Security Benefits
Updated for the “One Big Beautiful Bill” (OBBBA) 2025 Tax Law Changes
Will My Social Security Benefits be Taxable?
Most likely, yes, if you have substantial income in addition to your social security benefits.
Before I proceed, let me address some legal information. I am not a tax professional. This document is not intended as legal, accounting, or tax advice and only for informational purposes. I highly recommend consulting with your tax professional to determine how taxes will apply to your specific situation.
According to AARP, the Social Security Administration estimates that approximately 56% of Social Security recipients’ benefits are taxable.
To understand how the taxes work, we need to understand the definition of combined income.
Your adjusted gross income
+Nontaxable interest
+1/2 of your Social Security benefits
=Your “Combined Income”
🌟The “One Big Beautiful Bill” (OBBBA) 2025 Update: Seniors (65+) now get an additional $6,000 deduction per person. (subject to phase out)
Age 65+ Additional Deductions
- $6,000 per individual / $12,000 per married couple age 65+
- Below-the-line deduction (available to non-itemizers)
- Does not reduce AGI – Social Security taxation, Medicare premiums not affected
- Available 2025-2028
- Phases out between $75k-$175k (S/HOH) / $150k-$250k (MFJ) of AGI
- On top of additional standard deduction for age 65+/blind
OBBBA 2025 Tax Law Update: Deductions That May Lower Your
Taxable Benefits
The new tax law passed in July 2025 introduces deductions that may reduce your adjusted gross income (AGI) and combined income:
– Car Loan Interest Deduction: Up to $10,000 (for U.S.-assembled vehicles)
– Charitable Giving Deduction: Up to $1,000 (single) / $2,000 (joint) even if you don’t itemize
File a federal tax return as an “individual,” and your combined income is
Between $25,000 and $34,000, you may have to pay income tax on up to 50% of your benefits.
More than $34,000, up to 85% of your benefits may be taxable.
File a “joint” return with your spouse, and your combined income is
Between $32,000 and $44,000, you may have to pay income tax on up to 50% of your benefits.
More than $44,000, up to 85% of your benefits may be taxable.
Married and File a Separate Tax Return
You probably will pay taxes on your benefits.
If I Owe Taxes, How Do I Pay Them?
There are two ways to pay taxes. First, you can ask the Social Security Administration to withhold taxes from your benefit payments each month.
You can set up withholding when applying for your benefits. If you already receive payments and want to start withholding or change the percentage, you can fill out IRS tax form W-4V.
The second is sending in quarterly estimated tax payments. Your tax professional will calculate an estimate of your income, project your tax liability, and divide the amount into four payments.
In Closing
The taxation of benefits often plays a role in deciding when to file for benefits. Sometimes, due to other income sources, it may make sense to delay benefits until age 70.
I highly recommend examining all aspects before filing or selecting a tax strategy. For more information on knowing when to file, check out my article Why Knowing When to File for Social Security is Difficult — Really Difficult.
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