Often, social security benefits are taxable. It really depends on how much money you make.
You can do a quick calculation to see if any of your benefits may taxable as follows.
1. Add up all your income, including tax-exempt interest income, all income besides your Social Security benefits. This includes any taxable pensions, wages, interest, dividends, etc.
2. Add one half of your Social Security benefits to the number you got in “1.” above.
3. Compare this amount to your Base amount. If it exceeds the base amount, it may be taxable. Your base amount is as follows
$25,000 if you are single, head of household, or a qualifying widow(er),
$25,000 if you are married filing separately and lived apart from spouse for all of 2007.
$32,000 if you are married, filing jointly,
$0 if you are married filing separately and lived with your spouse at any time during 2007.
IRS Example from Pub 915. You and your spouse (both over 65) are filing a joint return for 2007 and both received social security benefits during the year. In January 2008, you received a Form SSA-1099 showing net benefits of $7,500 in box 5. Your spouse received a Form SSA-1099 showing net benefits of $3,500 in box 5. You also received a taxable pension of $20,000 and interest income of $500. You did not have any tax-exempt interest income. Your benefits are not taxable for 2007 because your income, is not more than your base amount ($32,000) for married filing jointly. Even though none of your benefits are taxable, you must file a return for 2007 because your taxable gross income ($20,500) exceeds the minimum filing requirement amount for your filing status.
My point in writing this is to help you get to know the rules about whether you owe taxes on Social Security. It can get a little complicated, depending on your specific situation, so I would advise you to seek professional advice if you need to understand it better. Tax software , such as TurboTax, will likely do all this for you and make your life so much easier than trying to read all the tax publications and such from the IRS. I have been using TurboTax for many years and I highly recommend it.
Also, if you normally do not need to file a return, be sure to read my post on the Tax Rebate Stimulus Explained. It explains why this year you will want to file a tax return even if you owe no money.
As with all my financial or tax advice, I am not advising as a professional and I give no professional legal or tax advice. If you need professional advice, please get that from a CPA or attorney.
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