Your Guide to Social Security Taxes in 2025

If you receive Social Security benefits, you might be wondering if that income is taxable. The short answer is yes, it can be, depending on your total income. Understanding these rules is key to managing your finances in retirement. This guide explains how Social Security taxes work and what you can expect for 2025.

Will Your Social Security Benefits Be Taxed in 2025?

Whether you owe federal income tax on your Social Security benefits depends on your “combined income.” This is a specific calculation used by the IRS to determine taxability. Many people are surprised to learn that their benefits are taxed, especially as other sources of retirement income come into play.

The core rules for taxing benefits have not changed in decades, but the financial landscape has. Factors like inflation and cost-of-living adjustments (COLAs) mean that more retirees find themselves crossing the income thresholds each year, making a portion of their benefits taxable for the first time.

How to Calculate Your Combined Income

To figure out if you’ll owe taxes, you first need to calculate your combined income (also sometimes called provisional income). It’s a straightforward formula:

Your Adjusted Gross Income (AGI) + Nontaxable Interest + One-Half of Your Social Security Benefits = Your Combined Income

Let’s break down those parts:

  • Adjusted Gross Income (AGI): This includes all of your taxable income, such as wages, pension payments, withdrawals from a traditional 401(k) or IRA, and capital gains. You can find this on your tax return.
  • Nontaxable Interest: This is interest you earn from sources like tax-exempt municipal bonds.
  • One-Half of Your Social Security Benefits: Simply take the total amount of Social Security benefits you received for the year and divide it by two.

Once you have your combined income total, you can compare it to the federal income thresholds to see where you stand.

Federal Income Thresholds for Taxing Benefits

The key thing to understand about these thresholds is that they are not adjusted for inflation. They were set in 1983 and 1993 and have remained the same ever since. This means that as incomes rise over time, more and more people become subject to this tax.

Here are the 2025 thresholds, which are the same as in previous years:

For Individuals:

  • Combined Income Below $25,000: You will likely not owe any federal taxes on your Social Security benefits.
  • Combined Income Between \(25,000 and \)34,000: Up to 50% of your Social Security benefits may be subject to federal income tax.
  • Combined Income Above $34,000: Up to 85% of your Social Security benefits may be subject to federal income tax.

For Married Couples Filing Jointly:

  • Combined Income Below $32,000: You will likely not owe any federal taxes on your Social Security benefits.
  • Combined Income Between \(32,000 and \)44,000: Up to 50% of your Social Security benefits may be subject to federal income tax.
  • Combined Income Above $44,000: Up to 85% of your Social Security benefits may be subject to federal income tax.

It’s important to note that “up to 85%” does not mean you pay an 85% tax rate. It means that 85% of your benefit amount is added to your taxable income, which is then taxed at your regular marginal tax rate.

What's Actually Changing in 2025?

While the tax law itself isn’t changing, the numbers that feed into it are. The most significant factor is the annual Cost-of-Living Adjustment (COLA).

The Social Security Administration announces the COLA for the upcoming year each October. For 2025, early projections from organizations like The Senior Citizens League suggest a COLA in the range of 2.5% to 3.0%. While this increase is meant to help benefits keep pace with inflation, it also raises your total Social Security income.

This increase directly impacts your combined income calculation. A higher benefit amount means the “one-half of your Social Security benefits” part of the formula gets larger. For retirees living near the income thresholds, even a modest COLA can be enough to push them over the line, causing their benefits to become taxable for the first time or moving them from the 50% taxable bracket to the 85% bracket.

Example Scenario

Let’s imagine a single retiree, Maria. In 2024, her income was:

  • IRA Withdrawals (AGI): $22,000
  • Social Security Benefits: \(20,000 (\)10,000 for the formula)
  • Her Combined Income: \(22,000 + \)10,000 = $32,000

Since her combined income is between \(25,000 and \)34,000, up to 50% of her benefits are taxable.

Now, let’s assume a 3% COLA for 2025. Her Social Security benefits will increase to $20,600.

  • IRA Withdrawals (AGI): $22,000 (assuming it stays the same)
  • Social Security Benefits: \(20,600 (\)10,300 for the formula)
  • Her New Combined Income: \(22,000 + \)10,300 = $32,300

She remains in the same tax bracket. However, if she needed to withdraw more from her IRA, say \(24,000, her new combined income would be \)34,300. This would push her over the $34,000 threshold, and now up to 85% of her benefits would be subject to tax. This illustrates how small changes can have a big impact.

Don't Forget About State Taxes

In addition to federal taxes, some states also tax Social Security benefits. The good news is that the majority of states do not. However, as of 2024, the following states may tax Social Security benefits to some degree, though many have their own income exemptions and deductions:

  • Colorado
  • Connecticut
  • Kansas
  • Minnesota
  • Montana
  • New Mexico
  • Rhode Island
  • Utah
  • Vermont
  • West Virginia

Rules change, so it’s always best to check with your state’s department of revenue for the most current information.

How to Plan for and Pay Your Taxes

If you expect to owe taxes on your benefits, you have two main options for paying them:

  1. Withholding from Your Benefits: You can ask the Social Security Administration to withhold federal taxes directly from your benefit payments. To do this, you’ll need to fill out and submit IRS Form W-4V, Voluntary Withholding Request. You can choose to have 7%, 10%, 12%, or 22% of your monthly benefit withheld for taxes.
  2. Making Estimated Tax Payments: You can pay your taxes directly to the IRS throughout the year by making quarterly estimated payments. This is a common method for people with various sources of income that don’t have taxes withheld.

Proactive planning with a financial advisor or tax professional can help you manage withdrawals from other retirement accounts to minimize your tax liability.

Frequently Asked Questions

Are Social Security disability (SSDI) benefits taxed? Yes, the rules are the same. If your combined income from all sources, including SSDI, exceeds the federal thresholds, a portion of your disability benefits will be taxable.

Are Social Security survivor benefits taxable? Yes, survivor benefits are also subject to the same tax rules based on the survivor’s combined income.

When will the official 2025 COLA be announced? The Social Security Administration typically announces the official COLA for the following year in the second week of October. You will see the change reflected in your January benefit payment.