Social Security
A portion of Social Security benefits are tax-free at the federal level, but once “combined income,” defined as adjusted gross income plus one-half of Social Security benefits plus tax-exempt interest, exceeds certain thresholds, some benefits are taxable at ordinary income tax rates.
For single taxpayers, up to 50% of Social Security benefits are taxable if combined income is between $25,000 and $34,000 and up to 85% of benefits are taxable when combined income exceeds $34,000. For married couples, up to 50% of Social Security benefits are taxable when combined income is between $32,000 and $44,000 and up to 85% of benefits are taxable once combined income exceeds $44,000. Most states do not tax Social Security benefits.
