Social Security Benefit Taxation Highlights

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Updated June 12, 2020
Social Security Benefit Taxation Highlights

 Taxpayers filing as single with provisional income
greater than $34,000, and taxpayers filing a joint return
with provisional income greater than $44,000, pay
Key Findings
federal income tax on up to 85% of their Social Security

In April 2020, the Social Security system provided over
benefits.
$89.7 bil ion in monthly benefits to 64.6 mil ion retired
workers, disabled workers, and their spouses, survivors,
 Holding benefits constant, as non-Social Security
and dependents.
income increases, provisional income increases, and

Since 1993, beneficiaries with income above certain
therefore the taxable amount of Social Security benefits
statutory thresholds are subject to federal income
increases.
taxation on up to 85% of their Social Security benefits.

Around half of al Social Security beneficiaries do not pay
 Holding non-Social Security income constant, as Social
federal income tax on their Social Security benefits, but
Security benefits increase, the taxable amount of Social
the proportion of beneficiaries who owe income tax on
Security benefits increases.
their Social Security benefits is rising.
Federal Income Tax on Taxable Social Security

The overal share of Social Security benefits that wil be
Benefits
paid as federal income taxes is projected to be 6.6% in
The federal tax rate and the amount of federal income tax
2020. It increases with income and is projected to reach
owed on taxable Social Security benefits are determined
nearly 32% for taxpayer units with income over $1
separately through the federal income tax system. They are
mil ion in 2020.
based on the taxpayer’s other taxable income and marginal

In 2019, the Social Security trust funds were credited
tax rate. Revenue from federal income taxes paid on Social
with $36.5 bil ion from taxation of Social Security
Security benefits is credited to the Social Security and
benefits, or 3.4% of the trust funds’ total income. Also in
Medicare Hospital Insurance (HI) trust funds.
2019, income to the Medicare Hospital Insurance trust
fund from the taxation of Social Security benefits was
Who is Affected by Social Security
$23.8 bil ion, or 7.4% of the trust fund’s total income.
Benefit Taxation, and By How Much?

Four bil s have been introduced in the 116th Congress
Around half of all Social Security beneficiaries do not pay
that would either raise the income thresholds for
federal income tax on their Social Security benefits. The
taxation of Social Security benefits or eliminate taxation
Congressional Budget Office (CBO) estimated that 49% of
of Social Security benefits.
Social Security beneficiaries were affected by the income
taxation of Social Security benefits in tax year 2014, almost
How Does Taxation of Social Security
doubling since 1998, when 26% of beneficiaries were
Benefits Work?
affected by benefit taxation. A 2015 Social Security
Administration (SSA) analysis projected that more than
56% of Social Security beneficiary families will owe
Taxable Social Security Benefits
income tax on their Social Security benefits in 2050. The
Calculation of taxable Social Security benefits depends on
proportion is growing because Social Security benefits are
the level of benefits and the level of non-Social Security
indexed to wage growth and adjusted for inflation, whereas
income. Social Security beneficiaries whose provisional
the provisional income thresholds used to determine the
income is above one of two statutory thresholds pay federal
taxable amount of Social Security benefits are fixed by
income taxes on a portion of their Social Security benefits.
statute and not indexed for inflation or wage growth.
Provisional income roughly equates to modified adjusted
gross income plus 50% of Social Security benefits.
The percentage of all tax returns with taxable Social

Security benefits has grown from 7.4% in 1999 to 13.7% in
Taxpayers filing as single with provisional income less
2017 (Figure 1, blue line). The taxable amount of Social
than $25,000, and taxpayers filing a joint return with
Security benefits as a percentage of all Social Security
provisional income less than $32,000, do not pay federal
benefit payments has grown from 19.5% in 1999 to 33.0%
income tax on their Social Security benefits.
in 2017 (Figure 1, orange line). CBO estimated that the

proportion will increase to more than 50% by 2046.
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, 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 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
2019, the Social Security trust funds were credited with
$36.5 billion from taxation of benefits, or 3.4% of the trust
funds’ total income. Under the intermediate assumptions,
the Social Security Trustees project that income taxes will
grow to 6.1% of income in 2029.
The additional income taxes paid by taxpayers filing as
single with provisional income greater than $34,000 and
taxpayers filing a joint return with provisional income
Source: CRS calculations from Internal Revenue Service, Statistics of
greater than $44,000, who pay tax on up to 85% of their
Income Bul etin Historical Table 1; IRS, SOI Tax Stats – Individual Income
Social Security benefits, are credited to the HI trust fund.
Tax Returns, Preliminary Data, Table 1; and Social Security
Income to the HI trust fund from the taxation of benefits
Administration, Office of the Chief Actuary, Trust Fund Tables, OASI
was $23.8 billion in 2019, or 7.4% of total HI trust fund
and DI Trust Funds, Combined, 1957 and later.
income. Under the intermediate assumptions, the Medicare
Notes: IRS data for 2017 are preliminary.
Trustees project that income taxes as a share of total
revenue will increase to 13.3% in 2029.
Federal income tax liability on Social Security benefits
Note that the 2020 intermediate assumptions reflect the
increases with income. The overall share of Social Security
Board of Trustees’ understanding of Social Security and
benefits that will be paid as federal income taxes is
Medicare at the start of 2020; they do not include potential
projected to be 6.6% in 2020 (Figure 2, right vertical axis),
effects of the Coronavirus Disease 2019, or COVID-19.
ranging from zero for the lowest income categories to
31.9% for taxpayer units with economic income over $1
Have Bills Been Introduced to Change
million. SSA’s 2015 analysis projected that, among all
the Taxation of Social Security Benefits?
beneficiary families, the mean percentage of Social Security
Four bills have been introduced in the 116th Congress that
benefits owed as taxes will be 10.9% in 2050.
would alter the taxation of Social Security benefits.
H.R. 567, the Save Social Security Act of 2019, would
Average federal income tax liability on Social Security
replace the current-law provisional income thresholds with
benefits across all Social Security taxpayer units is
a single threshold and would tax up to 85% of Social
projected to be about $3,200 in 2020 (Figure 2, left vertical
Security benefits for taxpayers filing as single or filing a
axis), ranging from zero for the lowest income categories to
joint return with provisional income greater than $100,000.
$12,000 for taxpayer units with economic income greater
If enacted, H.R. 567 would result in less income tax
than $1 million.
revenue for the Social Security and HI trust funds. To hold
the funds harmless, general revenues would be appropriated
Figure 2. Social Security Tax Liability Projected for
in amounts required to make up the lost revenue.
2020
H.R. 860 and S. 269, the Social Security 2100 Act, would
replace the current-law provisional income thresholds with
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 thresholds
would pay income taxes on up to 85% of their Social
Security benefits. H.R. 860 and S. 269 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
For Additional Information
Revenue Sources for the Social Security Trust Funds, JCX-41-19, Table 9,
CRS Report RL32552, Social Security: Taxation of Benefits
July 24, 2019.
Notes: The concept of economic income as defined by JCT includes
Paul S. Davies, Specialist in Income Security
the annual flow of al resources at the command of an individual and
represents an individual’s total wel -being.
IF11397
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Social Security Benefit Taxation Highlights


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