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Taxing Social Security Benefits

Jan 18, 2023

Blueprint Income Team

Your combined income affects how much your Social Security benefits are taxed. Learn what tax bracket you fall into.

  • Your combined income takes into account your earnings, pension incomes, and more

Did you know that up to 85% of your Social Security benefits could be subject to income taxes?

The extent to which your Social Security benefits are subject to taxes depends on your Modified Adjusted Gross Income (MAGI), which considers your earnings, pension income, taxable interest and dividends. The sum of MAGI, non-taxable interest and half of your Social Security benefits is considered your “combined income.”

But how does your combined income determine what percentage you’ll be taxed at?

Single people with combined income of less than $25,000 ($32,000 for married couples) will have 0% of their Social Security benefits taxed. Single people with a combined income between $25,001 and $34,000 ($32,001 to $44,000 for married couples) will have 50% of their Social Security benefits taxed. Finally, single people whose combined income exceeds $34,000 and married couples with a combined income over $44,000 will have 85% of their Social Security benefits taxed.

The Three-Legged Stool

The old retirement adage says that we should use the three-legged stool approach to prepare for retirement:

  1. Social Security – This is the government’s retirement plan for us. As long as you’re working (to earn the credits required addressed above) and paying taxes, you’re earning Social Security credits. When you retire, you’ll start receiving monthly Social Security income that will continue for as long as you’re alive.
  2. Pensions – This is the form employer retirement plans used to take. They provided a steady monthly paycheck no matter what happened in the market and no matter how long you lived. Because Social Security only covers, on average, 40% of one’s retirement expenses, people leaned on pensions for the rest. The problem today is that the second leg of the three-legged stool is wobbly or gone. Instead of offering pensions, employers are providing 401(k)s and matching contributions, which helps with the third stool.
  3. Personal Savings – So that you have access to money outside of, and beyond, monthly Social Security and pension checks, you need to save on your own. This money is generally invested differently to serve two purposes. First, money invested in liquid money market or savings accounts provides a cushion and access to extra cash in case of emergency. Second, money beyond that can be invested in the market for a high potential return. This is the money you’re comfortable losing.

How to Supplement Your Social Security

According to the Social Security Administration, individuals aged 65 and over in the top quartile for income (an average of $78,180) received only 18% of their income from Social Security. So where does the remaining 82% come from?

Purchasing an Income Annuity

Income annuities provide a guaranteed lifetime stream of income during your retirement. You pay a lump sum upfront to purchase your annuity from an insurance company. Then, the insurance company sends you a series of payments for the rest of your life.

How Can I Purchase an Income Annuity?

At Blueprint Income, we offer annuities from more than 15 top rated insurance companies. Click below to get real-time personalized quotes.

Income Annuity Quotes


From there, you’ll get access to our annuity guides and team of specialists to help you analyze your retirement finances and walk you through the application process.

Disclaimer: This article is provided for informational purposes only and not for the purpose of sales, solicitation or inducement to purchase any annuity product.  Blueprint Income is not responsible for the accuracy of this information. If you wish to confirm the information contained herein, prior to making an annuity purchase, please consult with your tax advisor.

Blueprint Income Team

We are a team of finance, insurance, and actuarial professionals working to make it easier for everyone to achieve a steady and comfortable retirement. We write about annuities (the good and the bad) and provide strategies to help Americans prepare for retirement.


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