Maybe. It depends on whether or not you have other income. If 100% of your income is from Social Security payments, there is no income tax due on your benefits. However, if you have other income in addition to your Social Security income, it may become taxable, up to 85% of it.
The IRS looks at what is called a modified adjusted gross income (MAGI). In creating the MAGI, tax-free income (e.g. muni bond income) is pulled into the equation. The MAGI equation is:
All Income + (1/2 Social Security Income)
There are two break points for each filing status. If your filing status is married filing jointly, then SS income starts becoming 50% taxable at MAGI = $32,000 and 85% taxable at $44,000.
For all other filing status, SS income becomes 50% taxable for MAGI = $25,000 and 85% taxable at $34,000.
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Income Tax Preparation in Austin Texas
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