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December 20, 2019
Social Security Benefit Taxation Highlights
Taxpayers filing as single with provisional income
Key Findings
greater than $34,000, and taxpayers filing a joint return
In November 2019, the Social Security system provided
with provisional income greater than $44,000, pay
almost $87 bil ion in monthly benefits to 64 mil ion
federal income tax on up to 85% of their Social Security
retired workers, disabled workers, and their spouses,
benefits.
survivors, and dependents.
Since 1993, beneficiaries with income above certain
Holding benefits constant, as non-Social Security
statutory thresholds are subject to federal income
income increases, provisional income increases, and
taxation on up to 85% of their Social Security benefits.
therefore the taxable amount of Social Security benefits
Around half of all Social Security beneficiaries do not pay
increases.
federal income tax on their Social Security benefits, but
the proportion of beneficiaries who owe income tax on
Holding non-Social Security income constant, as Social
their Social Security benefits is rising.
Security benefits increase, the taxable amount of Social
Security benefits increases.
The overall share of Social Security benefits that wil be
paid as federal income taxes is projected to be 6.6% in
Federal Income Tax on Taxable Social Security
2020. It increases with income and is projected to reach
Benefits
nearly 32% for taxpayer units with economic income
The federal tax rate and the amount of federal income tax
over $1 mil ion in 2020.
owed on taxable Social Security benefits are determined
In 2018, the Social Security trust funds were credited
separately through the federal income tax system. They are
with $35.0 bil ion from taxation of Social Security
based on the taxpayer’s other taxable income and marginal
benefits, or 3.5% of the trust funds’ total income. Also in
tax rate. Revenue from federal income taxes paid on Social
2018, income to the Medicare Hospital Insurance trust
Security benefits is credited to the Social Security and
fund from the taxation of Social Security benefits was
Medicare Hospital Insurance (HI) trust funds.
$24.2 bil ion, or 7.9% of the trust fund’s total income.
Three bil s have been introduced in the 116th Congress
Who is Affected by Social Security
that would either raise the income thresholds for
Benefit Taxation, and By How Much?
taxation of Social Security benefits or eliminate taxation
Around half of all Social Security beneficiaries do not pay
of Social Security benefits.
federal income tax on their Social Security benefits. The
Congressional Budget Office (CBO) estimated that 49% of
How Does Taxation of Social Security
Social Security beneficiaries were affected by the income
Benefits Work?
taxation of Social Security benefits in tax year 2014, almost
doubling since 1998, when 26% of beneficiaries were
affected by benefit taxation. A 2015 Social Security
Taxable Social Security Benefits
Administration (SSA) analysis projected that more than
Calculation of taxable Social Security benefits depends on
56% of Social Security beneficiary families will owe
the level of benefits and the level of non-Social Security
income tax on their Social Security benefits in 2050. The
income. Social Security beneficiaries whose provisional
proportion is growing because Social Security benefits are
income is above one of two statutory thresholds pay federal
indexed to wage growth and adjusted for inflation, whereas
income taxes on a portion of their Social Security benefits.
the provisional income thresholds used to determine the
Provisional income roughly equates to modified adjusted
taxable amount of Social Security benefits are fixed by
gross income plus 50% of Social Security benefits.
statute and not indexed for inflation or wage growth.
Taxpayers filing as single with provisional income less
The percentage of all tax returns with taxable Social
than $25,000, and taxpayers filing a joint return with
Security benefits has grown from 7.4% in 1999 to 13.3% in
provisional income less than $32,000, do not pay federal
2016 (Figure 1, blue line). The taxable amount of Social
income tax on their Social Security benefits.
Security benefits as a percentage of all Social Security
benefit payments has grown from 19.5% in 1999 to 31.4%
Taxpayers filing as single with provisional income
in 2016 (Figure 1, orange line). CBO estimated that the
between $25,000 and $34,000, and taxpayers filing a
proportion will increase to more than 50% by 2046.
joint return with provisional income between $32,000
and $44,000, pay federal income tax on up to 50% of
their Social Security benefits.
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Social Security Benefit Taxation Highlights
Figure 1. Income Taxation of Social Security Benefits
How Important Is Benefit Taxation to
the Social Security Trust Funds?
The proceeds from taxing up to 50% of Social Security
benefits for taxpayers filing as single with provisional
income between $25,000 and $34,000, and taxpayers filing
a joint return with provisional income between $32,000 and
$44,000, are credited to the Social Security trust funds. In
2018, the Social Security trust funds were credited with
$35.0 billion from taxation of benefits, or 3.5% of the trust
funds’ total income. Under the intermediate assumptions,
the Social Security Trustees project that income taxes will
grow to 5.7% of income by 2028 and 7.4% by 2095.
The additional income taxes paid by taxpayers filing as
single with provisional income greater than $34,000 and
Source: CRS calculations from Internal Revenue Service, Statistics of
taxpayers filing a joint return with provisional income
Income Bul etin Historical Table 1 and Social Security Administration,
greater than $44,000, who pay tax on up to 85% of their
Office of the Chief Actuary, Trust Fund Tables, OASI and DI Trust Funds,
Social Security benefits, are credited to the HI trust fund.
Combined, 1957 and later.
Income to the HI trust fund from the taxation of benefits
was $24.2 billion in 2018, or 7.9% of total HI trust fund
Federal income tax liability on Social Security benefits
income. Under the intermediate assumptions, the Medicare
increases with income. The overall share of Social Security
Trustees project that income taxes as a share of total
benefits that will be paid as federal income taxes is
revenue will increase to 12.4% in 2028.
projected to be 6.6% in 2020 (Figure 2, right vertical axis),
ranging from zero for the lowest income categories to
Have Bills Been Introduced to Change
31.9% for taxpayer units with economic income over $1
the Taxation of Social Security Benefits?
million. SSA’s 2015 analysis projected that, among all
Three bills have been introduced in the 116th Congress that
Social Security beneficiary families, the mean percentage of
would alter the taxation of Social Security benefits.
Social Security benefits owed as taxes will be 10.9% in
2050.
H.R. 567, the Save Social Security Act of 2019, would
replace the current-law provisional income thresholds with
Average federal income tax liability on Social Security
a single threshold and would tax up to 85% of Social
benefits across all Social Security taxpayer units is
Security benefits for taxpayers filing as single or filing a
projected to be about $3,200 in 2020 (Figure 2, left vertical
joint return with provisional income greater than $100,000.
axis), ranging from zero for the lowest income categories to
If enacted, H.R. 567 would result in less income tax
$12,000 for taxpayer units with economic income greater
revenue for the Social Security and HI trust funds. To hold
than $1 million.
the funds harmless, general revenues would be appropriated
in amounts required to make up the lost revenue.
Figure 2. Social Security Tax Liability Projected for
2020
H.R. 860, the Social Security 2100 Act, would replace the
current-law provisional income thresholds with new, higher
thresholds of $50,000 for taxpayers filing as single and
$100,000 for taxpayers filing a joint return. Beneficiaries
with provisional income above the new thresholds would
pay income taxes on up to 85% of their Social Security
benefits. H.R. 860 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).
H.R. 3971, the Senior Citizens Tax Elimination Act, would
eliminate the federal income taxation of Social Security
benefits. 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.
Source: CRS and Joint Committee on Taxation (JCT), Background on
Revenue Sources for the Social Security Trust Funds, JCX-41-19, Table 9,
For Additional Information
July 24, 2019.
CRS Report RL32552, Social Security: Taxation of Benefits
Notes: The concept of economic income as defined by JCT includes
the annual flow of al resources at the command of an individual and
Paul S. Davies, Specialist in Income Security
represents an individual’s total well-being.
IF11397
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Social Security Benefit Taxation Highlights
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