Most people realize that a portion of a Social Security benefit can be taxable. It’s either up to 50% or up to 85% depending on adjusted income. The key triggers for a single person are $25,000 (50%) or $34,000 (85%) in combined income. Here is a simple explanation.
Keep in mind that the actual tax you may pay on a portion of your Social Security benefit is based on your income tax bracket.
My recent revelation is that it’s possible to have less than 50% of your Social Security benefit taxable, hence the use of “up to” in the explanation.
Say you’re a single filer who receives a monthly benefit of $1,543 (the average benefit after the cost of living increase in January 2021). Your total annual benefits would be $18,516. Half of that would be $9,258. Then let’s say you have a combined income of $30,000. The difference between your combined income and your base amount (which is $25,000 for single filers) is $5,000. So the taxable amount that you would enter on your federal income tax form is $5,000, because it is lower than half of your annual Social Security benefit.SmartAsset
Keep in mind that thirteen states also tax a portion of Social Security benefits.