Social Security Benefit Taxation Highlights
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Updated September 23, 2024
Social Security Benefit Taxation Highlights
At a Glance
At a Glance• In August 2024Social Security Benefit Taxation Highlights
121138.4 billion in monthly benefits to almost 68.1more than 71.3 million retired or disabled workers and their spouses, survivors, and dependents.
•
Since 1984, beneficiaries with income above certain statutory thresholds are subject to federal income taxation on up to 50% of their Social Security benefits. Since 1993, beneficiaries with income above a higher set of statutory thresholds are subject to federal income taxation on up to 85% of their Social Security benefits.
•
The proportion of beneficiaries who owe income tax on theirhave taxable Social Security benefits is rising.
• The overall share of
The percentage of all Social Security benefits that beneficiaries paid as federal income taxes rose from 2.2% in 1994 to 6.62% in 2022.
• In 20232025.
In 2025, the Social Security trust funds were credited with $50.7$57.8 billion from the taxation of Social Security benefits, or 3.84.0% of the trust funds’' total income. Also in 20232025, income to the Medicare Hospital Insurance trust fund from the taxation of Social Security benefits was $35.0$41.1 billion, or 8.49% of the trust fund’'s total income.
Why Are Social Security Benefits Taxed?
Taxation of Social Security benefits began with the Social Security Amendments of 1983. There were two primary reasons for taxing Social Security benefits. The first was to improve tax equity by treating Social Security benefits more like other forms of retirement income and other income designed to replace lost wages. The second was to provide revenue to strengthen the financial solvency of the Social Security trust funds.
How Does Taxation of Social Security Benefits Work?
Taxable Social Security Benefits
Under current law, there is a statutory formula used to calculatedetermines the tax liability on Social Security benefits. The formula depends on the amount of a taxpayer’'s Social Security benefits, other income, tax filing status, and other factors. Social Security beneficiaries whose provisional income is above one of two statutory thresholds pay federal income taxes on a portion of their Social Security benefits. Provisional income roughly equates to modified adjusted gross income plus 50% of Social Security benefits.
Generally, up to 85% of Social Security benefits may be taxable for recipients whose provisional income exceeds either of two statutory thresholds based on filing status:
• Taxpayers filing as single with provisional income less
than $25,000 and taxpayers filing joint returns with provisional income less than $32,000 do not pay federal income tax on their Social Security benefits.
•
Taxpayers filing as single with provisional income
between $25,000 and $34,000 and taxpayers filing joint returns with provisional income between $32,000 and $44,000 pay federal income tax on up to 50% of their Social Security benefits.
•
Taxpayers filing as single with provisional income
greater than $34,000 and taxpayers filing joint returns with provisional income greater than $44,000 pay federal income tax on up to 85% of their Social Security benefits.
Federal income tax liability on Social Security benefits increases with income.
• Holding benefits constant: As non–Social Security
income increases, provisional income increases, and therefore the taxable amount of Social Security benefits increases.
•
Holding non-Social Security income constant: As Social
Security benefits increase, the taxable amount of Social Security benefits increases.
Federal Income Tax on Taxable Social Security Benefits
The federal tax rate and the amount of federal income tax owed on taxable Social Security benefits are determined separately through the federal income tax system. They are based on the taxpayer’'s other taxable income and marginal tax rate. Revenue from federal income taxes paid on Social Security benefits is credited to the Social Security and Medicare Hospital Insurance (HI) trust funds.
Who Is Affected by Social Security Benefit Taxation, and by How Much?
Around half of all Social Security beneficiaries do not pay federal income tax on their Social Security benefits. The Congressional Budget Office estimated that about half
The Congressional Budget Office estimates that 48% of Social Security beneficiaries paid will pay income tax on their Social Security benefits in 2021. 2026. A 2015 SocialSocial Security Administration analysisanalysis projected that more than 56% of Social Security beneficiary families will owe income tax on their Social Security benefits in 2050.
The proportion is growing because Social Security benefits are indexed to wage growth and adjusted for inflation, whereas the provisional income thresholds used to determine the taxable amount of Social Security benefits
Social Security Benefit Taxation Highlights
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are fixed by statute and not indexed for inflation or wage growth. The intent behind using unindexed static thresholds in the 1983 legislation was that eventually all Social Security benefits would become subject to taxation due to increases from wage and price growth.that eventually, over a long period of time, there would essentially be no thresholds and all Social Security benefits would become subject to taxation.
The taxable amount of Social Security benefits as a percentage of all Social Security benefit payments has grown from 12.2% in 1994 to 38.2% in 20222023 (Figure 1, blue line). As the proportion of Social Security benefits that is taxable has risen, the taxes paid on Social Security benefits hashave also risen. For each dollar of Social Security benefits paid in 1994, approximately 2.2 cents were paid as federal income tax. This share of all Social Security benefits paid as federal income tax roseroughly tripled from 2.2% in 1994 to 6.62% in 20222025, or 6.62 cents paid as income tax for each dollar of Social Security benefits. (Figure 1, orange line).
Figure 1. Taxation of Social Security Benefits, 1994- 2022
Source: CRS calculations from Internal Revenue Service (IRS), Statistics of Income, Table A, and Individual Income Tax Returns, Preliminary Data, Tax Year 2022; Social Security Administration, Trust Fund Data, Table IV.A3; and Centers for Medicare and Medicaid Services Trustees Report and Trust Funds. .
Notes: IRS data for 2022 are preliminarytax year 2024 were unavailable. Total Social Security benefits include payments for vocational rehabilitation services furnished to disability beneficiaries. Benefit amounts are reduced by the amount of reimbursement for unnegotiated benefit checks.
How Important Is Benefit Taxation to the Trust Funds?
The income taxes paid on the first 50% of Social Security benefits are credited to the Social Security trust funds. In 20232025, this was $50.7$57.8 billion, or 3.84.0% of the Social Security trust funds’' total income. Under their intermediate assumptions, the Social Security trusteestrustees project that income taxes as a share of total revenue will grow to 65.6% in 2033..
The income taxes paid on the next 35% of taxable Social Security benefits (from 50% to 85%) are credited to the HI trust fund. In 20232025, this was $35.0 billion in 2023, or 8.4$41.1 billion, or 8.9% of total HI trust fund income. Under their intermediate assumptions, the Medicare trusteestrustees project that income taxestaxes as a share of total revenue will increase to 13.6% in 2033.
Have Bills Been Introduced to Change the Taxation of Social Security Benefits?
At the time of publication, six
Several bills hadhave been introduced in the 118119th Congress that would eliminate or alterto modify or repeal the taxation of Social Security benefits. Legislation to modify or repeal the taxation of Social Security benefits would amend Section 86 of the Internal Revenue Code.
Eliminate Social Security Benefit Taxation H.R. 3206, the Senior Citizens Tax Elimination in Section 86 of the Internal Revenue Code. The following bills are some examples of bills that would eliminate or modify the taxation of Social Security benefits.
Eliminate Social Security Benefit Taxation
H.R. 904, the No Tax on Social Security Act; S. 458 and H.R. 1040, the Senior Citizens Tax Elimination Act; and H.R. 2621, the REAL AMERICA Act, would exclude all Social Security benefits from provisionalgross income, thereby eliminating the federal income taxation of Social Security benefits. General revenues would be appropriated in amounts needed to hold the Social Security and HI trust funds harmless from the loss of income tax revenues.
Section 2 of H.R. 7084, the You Earned It, You Keep It Act, would exclude Social Security benefits from gross income for purposes of federal income taxes. General funds would be appropriated in amounts needed to hold the Social Security and HI trust funds harmless from the loss of income tax revenues.
H.R. 9359 would repeal the inclusion of Social Security benefits in gross income. The bill would also appropriate funds from the Treasury not otherwise appropriated to fund the Social Security, HI, and Railroad Retirement trust funds, holding them harmless.
H.R. 1129, the TRUST Act, would raise the thresholds to $50,000 and $59,000 for taxpayers filing as single and $64,000 and $76,000 for taxpayers filing joint returns. Inflation adjustments would be applied to the thresholds for determining taxable Social Security benefits.Modify Social Security Benefit Taxation Section 104 of H.R. 4583 and S. 2280, the Social Security 2100
Modify Social Security Benefit Taxation
3534,000 for taxpayers filing as single and $5068,000 for taxpayers filing joint returns. Beneficiaries with provisional income above the thresholds would pay income taxes on up to 85% of their Social Security benefits. This provision would reduce the number of beneficiaries who pay federal income taxes on their Social Security benefits, leaving less income tax revenue for the Social Security trust funds. (The HI trust fund would be held harmless.) These changes would apply to tax years 2025-2034.
S. 2800Inflation adjustments would be applied to the thresholds for determining taxable Social Security benefits.
S. 1109, the Social Security Check Tax Cut Act, would temporarily reduce the amount of Social Security benefits—except disabled worker benefits—and tier one Railroad Retirement benefits included in income for taxation. It would reduce the amount of those benefits that are taxable under current law by 10% for tax year 20242026 and by 20% for tax year 20252027. The taxation of Social Security disability benefits would be unchanged. General funds would be appropriated in amounts needed to hold the Social Security and HI trust funds harmless from the loss of income tax revenues.
For Additional Information
CRS Report RL32552, Social Security: Taxation of Benefits
Internal Revenue Service, Publication 915 (2023), Social Security and Equivalent Railroad Retirement Benefits
T. Lynn Sears, Analyst in Social Policy
Social Security Benefit Taxation Highlights
https://crsreports.congress.gov | IF11397 · VERSION 3 · UPDATED
IF11397
Disclaimer
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S. 5084 would apply inflation adjustments to the thresholds for determining taxable Social Security benefits.
For Additional Information
CRS Report RL32552, Social Security: Taxation of Benefits
CRS Report R48613, Taxation of Social Security Benefits and the Senior Deduction in P.L. 119-21: In Brief
Internal Revenue Service, Publication 915 (2025), Social Security and Equivalent Railroad Retirement Benefits