Reminder: Social Security Benefits May Be Taxable in Greensboro, NC, and Raleigh, NC

If you’re receiving Social Security benefits, it’s essential to be aware that a portion of your benefits may be subject to federal income tax. Understanding the tax implications of your Social Security benefits can help you avoid surprises come tax time. Here’s what you need to know:

How Are Social Security Benefits Taxed?

The portion of your Social Security benefits that is subject to federal income tax depends on your combined income. Combined income is calculated by adding together your adjusted gross income, nontaxable interest, and one-half of your Social Security benefits.

Who is Affected?

If you file your 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, you may have to pay income tax on up to 85% of your benefits.

If you file a joint return, and you and your spouse have a combined income that 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, you may have to pay income tax on up to 85% of your benefits.

How Can You Avoid a Surprise Tax Bill?

To avoid a surprise tax bill, you can have federal taxes withheld from your Social Security benefits. You can choose to have 7%, 10%, 12%, or 22% of your monthly benefit withheld for taxes.

Other Considerations:

• If you receive Social Security benefits and work, your earnings may also affect the amount of your benefits that are subject to tax. If you’re under full retirement age, $1 in benefits will be withheld for every $2 you earn above the annual limit ($19,560 in 2022).
• If you’re unsure whether your benefits are taxable or how much you should have withheld for taxes, it’s a good idea to consult with a tax professional.

Planning Ahead:

Understanding the tax implications of your Social Security benefits can help you plan ahead and avoid any surprises come tax time. If you need assistance with tax planning in Greensboro, NC, Raleigh, NC, or the surrounding areas, don’t hesitate to contact NC CPA PLLC. We’re here to help you navigate the complexities of the tax code and ensure that you’re maximizing your tax savings.