Social Security Income Taxation refers to the process by which the federal government taxes a portion of Social Security benefits received by individuals, depending on their overall income level.
Social Security benefits can be considered taxable income if the recipient’s combined income exceeds certain thresholds. The combined income is calculated by adding the adjusted gross income (AGI), any nontaxable interest, and half of the Social Security benefits.
For example, if an individual’s combined income exceeds $25,000 for single filers (or $32,000 for married couples filing jointly), up to 50% of their Social Security benefits may be subject to federal income tax. If the combined income exceeds $34,000 (or $44,000 for married couples), up to 85% of the benefits may be taxable.
Understanding the taxation of Social Security income is essential for financial planning and accurately reporting income on tax returns.
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