Do I need to file a tax return if my only income is Social Security?

Social Security Income (SSI) is considered taxable income. But these payments aren’t always taxable. There are a few exceptions, so let’s take a close look.

1) Is my social security taxable?

For purposes of this discussion, we are talking about social security payments that get reported to you and the IRS on a tax form SSA-1099. These are social security retirement income, survivor benefits, and Social Security Disability Insurance (SSDI) payments. The good news is that 15% of your social security payments are never taxable.

But what about the other 85 percent?

Let’s start with the federal tax return. If half of your social security income, plus any other taxable income (plus tax-exempt interest), is below the “base amount,” none of your social security is taxed. So NO taxes on social security if you are below the base amount (using the previous calculation) listed for your filing status:

• $25,000 if you’re single, head of household, or qualifying widow(er),
• $25,000 if you’re married filing separately and lived apart from your spouse for the entire year,
• $32,000 if you’re married filing jointly,
• $0 if you’re married filing separately and lived with your spouse at any time during the tax year.

If single (or head of household, or qualifying widow(er), etc.) and half your social security payments plus your other income is between $25,000 and $32,000, up to 50% of your social security is taxable. If the total is greater than $32,000, up to 85% of your social security is taxable. 

If filing jointly and your total is between $32,000 and $44,000, up to 50% of your social security is taxable. If the total is greater than $44,000, up to 85% of your social security is taxable. 

2) Why is it “up to” for greater than $25,000 or $32,000? 

There is a calculation to determine the exact amount that is taxable above those base amounts. 

You can find the exact amount of social security that is taxable by using the IRS’s Interactive Tax Assistant, but that doesn’t indicate whether or not you have to file a tax return nor does it tell you what you may owe in taxes. You can determine what you may owe in taxes by using an online estimator or by filing a tax return. 

3) So I have to file a tax return if I am above the $25,000 or the $32,000?

Not always. Now we have to see if you are above the filing thresholds. For tax year 2021, the amount of taxable income you have to be above, and therefore be required to file, is:

• Single filing status:
  • $12,400 if under age 65
  • $14,050 if age 65 or older
• Married filing jointly:
  • $24,800 if both spouses under age 65
  • $26,100 if one spouse under age 65 and one age 65 or older
  • $27,400 if both spouses age 65 or older
• Married filing separately — $5 for all ages
• Head of household:
  • $18,650 if under age 65
  • $20,600 if age 65 or older
• Qualifying widow(er) with dependent child:
  • $24,800 if under age 65
  • $26,100 if age 65 or older

Examples: 

Example 1: 

An SSI recipient who files as single receives $30,000 in social security for 2021. He also receives $15,000 from IRA withdrawals.

• $30,000 / 2 = $15,000. 
• $15,000 + $15,000 = $30,000. 
• $30,000 > $25,000. So some of the social security is taxable. 
• Using the Interactive Tax Assistant, $2500 of social security  is taxable. 
• $2500 + $15,000 (from the IRA)= $17,500 of taxable income.
• $17,500 > $12,550 (the filing threshold), so a tax return has to be filed, which may result in a small tax liability depending on his whole tax situation. 

Example 2:

An SSI recipient is single and receives $30,000 in social security for 2021. She also receives $11,000 in earned income.

• $30,000 / 2 = $15,000. 
• $15,000 + $11,000 = $26,000
• $26,000 > $25,000. So some of the social security is taxable. 
• Using the Interactive Tax Assistant, $500 of social security is taxable. 
• $500 + $11,000 (from the IRA) = $11,500 of taxable income.
• $11,500 < $12,550 (the filing threshold), so NO tax return has to be filed.

Example 3:

An SSI recipient is a single parent with one child and receives $30,000 in social security for 2021. She also receives $5,000 in earned income. She qualifies to file as head of household. 

• $30,000 / 2 = $15,000. 
• $15,000 + $5,000 = $20,000
• $20,000 < $25,000. So none of the social security income is taxable. 
• $5,000 (earned income) is taxable, but
• $5,000 < $18,800 (the head of household filing threshold), so NO tax return is required to be filed. Note: But the taxpayer may qualify for refundable credits like EITC and the Child Tax Credit, so it may be smart to file a tax return.

4) Should I file a tax return even if it is not required?

If you could get a benefit by filing a tax return, you should consider filing a tax return even when not legally required to do so. If you had some tax withholding, you may want to file a tax return to get those benefits back. If you are in the position that you have no filing requirement each year, it may be wise to set all tax withholding to zero. 

For the 2021 tax return, there may be two other reasons to file a tax return even if not required:

1. You did not receive the full third COVID-19 stimulus payment (or Economic Impact Payment) which you were qualified to receive. You can pick up any missed amount of the third stimulus payment as the Recovery Rebate Credit on your 2021 tax return. 
2. You would claim children who qualify for the Child Tax Credit and/or if you paid for child or dependent care that qualifies for the Child and Dependent Care Credit. Both of these credits for 2021 are fully refundable, meaning even if you have zero tax liability, you can receive the credits. 

Another time to file when not legally obligated to is if you are required to file your state return and you want to file it electronically. Sometimes state tax returns will not be processed electronically if a federal tax return is not processed first. 

5) Do I need to file a state tax return?

Some states tax social security and some states do not. Each state has different filing requirements and income thresholds for filing tax returns. So each state has to be looked at on a case-by-case basis. 

You should consult or research your state’s applicable department – usually a department of revenue or a department of taxation. Just like for a federal tax return, there may be a benefit to filing a state tax return even if you are not legally required to file. 

Hopefully, this article gives you valuable information concerning social security and taxes. If you still need help with your tax situation and would like free help, consider getting help from the IRS Volunteer Income Tax Assistance (VITA) and the Tax Counseling for the Elderly (TCE) programs.