AUTHOR: Rick Connor on 4/27/2026 FIRST: Mark Crothers on 4/27 | RECENT: Kenneth Tobin on 4/29
Comments
David,
My response below was posted before I saw all of your comment. The calculation is a multi-step process and works on a sliding scale. At most 85% of your SS benefit is taxable. For the example you give - $142K total, $58K income, $84K SS - the taxable portion is $53,600, or 64% of the total. The couple would need an additional $21K in other income ($79K total other income) to hit 85% of their benefits being taxable. If you really want to understand it work through it by hand. Here is a document with several examples to illustrate the process. It is not for the faint of heart.
Bill, thanks again for the important information. This was a point of emphasis for VITA volunteers this past tax season. We had a number of clients who did not trust direct deposit and wanted paper checks. Our site lead was very understanding, but firm, and convinced most of them to switch to Direct Deposit. I have not heard any direct feedback from someone who opened for a paper check, received the notice, and chose not to comply.
David - the calculation of the percentage of SS benefits that are taxable is one of the more complex calculations the average retired taxpayer faces. It is based on a unique version of income - I've seen it called Combined income or Provisional Income. It is equal to the sum of:
Your Adjusted Gross Income (AGI) (excluding Social Security)
Plus nontaxable interest (such as interest from municipal bonds)
Plus one-half (50%) of your total Social Security benefits for the year
Your combined income is then subject to a complex calculation to determine the taxable portion. I asked Claude to calculate the taxable benefit for the example above - $124,344 of SS benefits and no other income. It confirmed the $21,446 amount that Dinkytown provided. Here's the breakdown. Good news — the math is confirmed. The federal thresholds that determine how much of Social Security is taxable haven't changed for 2026 (they're not inflation-indexed): for married couples filing jointly the thresholds are $32,000 and $44,000. Assuming this couple's only income is Social Security (no pension, IRA withdrawals, interest, dividends, etc.) and they file married filing jointly, here's the IRS worksheet math:StepCalculationAmountTotal SS benefits$124,344Half of benefits124,344 × 50%$62,172+ other incomenone$0Combined income$62,172Less base amount62,172 − 32,000$30,172Less second threshold30,172 − 12,000 $18,172(the $32k–$44k band)50% of the $12,000 band$6,00085% of the excess above $44,00018,172 × 85%$15,446Taxable SS benefit6,000 + 15,446≈ $21,446
Andrew, thanks for a thoughtful, and thought-provoking, story. I'm happy your mother-in-law was able to receive quality care and wish her the best. As I write this, I'm sitting in our sun room that has a wall full of pictures of my wife's and my family. All 4 of her grandparents emigrated to America (2 from Ireland, 2 from Italy). They all left family behind, but none ever returned to their birth country. My wife's maternal grandmother left Sorrento, IT as a young woman to be a governess in America. She never saw her parents again. When I think about the birth lottery, the era you were born in makes a great difference. I'm glad that Joey, and you, can communicate instantly with Joey's mother, and visit, and consider living there part-time. I've written about the concept of societal wealth - it still fascinates me.
Bill, thanks for the great information. I have also used IRS Direct Pay with no issues. I also enjoy playing the "how close to zero" game with our tax return. If I owe $1,000 or less at tax filing I consider it a win.
Dan, great thoughts on a topic that is a big change for many of us. When I first started consulting at 60 my income was not regular, and I used form 2210 to annualize my income to prevent an underpayment and penalties/interest. My income varied from year to year, especially during Covid, so the safe harbor method (pay 100% of previous year's tax) wasn't always attractive. It gave me an appreciation for the challenges self-employed taxpayers face.
Thanks Edmund. During my CFP classes we reviewed a paper that demonstrated that a well executed tax strategy could add up to 2 years to a retirement portfolio's life. That made an impression on me.
Dan, you are right on. One of the challenges with TaxAide is you get minimal time with clients, and there are often ways you could help people who really need good advice. There are very good tools out there (like Dinkytown, AI, and many others) but I find many folks hate the topic.
Those of us lucky to have a good pension will likely never have to worry about calculating the percentage of our SS benefits that are taxable. I just assume 85% for planning. My interest in financial and tax planing during retirement really came from taking care of my parents finances, and then my in-laws and my wife's aunt. My parents had very little, so it was more about squeaking every last dollar. My in-laws were well prepared, but my mother-in-law had significant longevity in her genes. When she developed dementia and required expensive care, it made sense to try to manage her finances as tax-efficiently as possible. With my wife's aunt, who also had dementia, it was more about finding lost assets, simplifying her assets, and protecting her. I guess I feel the same sense of concern for the TaxAide clients. It's hard to break old habits.
Bill, As always thanks for the great information. My research matches with yours about the I bonds in the Gift Box. I will have to encourage my sons to create their TD accounts (if they haven't yet) and then transfer the gifted bonds. We also have used the UGift program for our grandson's 529. Maybe just focus on that. This weekend we were in Cooperstown, NY at a baseball tournament for our oldest grandson. At dinner the last night he convinced me to invest in a "Mystery Pack" of baseball cards. I happily forked over a few crisp $20s. I guess they are more tangible than a Treasury Direct gift announcement email. Cheers, Rick
Comments
David, My response below was posted before I saw all of your comment. The calculation is a multi-step process and works on a sliding scale. At most 85% of your SS benefit is taxable. For the example you give - $142K total, $58K income, $84K SS - the taxable portion is $53,600, or 64% of the total. The couple would need an additional $21K in other income ($79K total other income) to hit 85% of their benefits being taxable. If you really want to understand it work through it by hand. Here is a document with several examples to illustrate the process. It is not for the faint of heart.
Post: Tax Complications – How SS Benefits interact with Other Income
Link to comment from August 19, 2026
Bill, thanks again for the important information. This was a point of emphasis for VITA volunteers this past tax season. We had a number of clients who did not trust direct deposit and wanted paper checks. Our site lead was very understanding, but firm, and convinced most of them to switch to Direct Deposit. I have not heard any direct feedback from someone who opened for a paper check, received the notice, and chose not to comply.
Post: Frozen 2025 1040 refund and the IRS CP53E notice
Link to comment from August 19, 2026
David - the calculation of the percentage of SS benefits that are taxable is one of the more complex calculations the average retired taxpayer faces. It is based on a unique version of income - I've seen it called Combined income or Provisional Income. It is equal to the sum of:
- Your Adjusted Gross Income (AGI) (excluding Social Security)
- Plus nontaxable interest (such as interest from municipal bonds)
- Plus one-half (50%) of your total Social Security benefits for the year
Your combined income is then subject to a complex calculation to determine the taxable portion. I asked Claude to calculate the taxable benefit for the example above - $124,344 of SS benefits and no other income. It confirmed the $21,446 amount that Dinkytown provided. Here's the breakdown. Good news — the math is confirmed. The federal thresholds that determine how much of Social Security is taxable haven't changed for 2026 (they're not inflation-indexed): for married couples filing jointly the thresholds are $32,000 and $44,000. Assuming this couple's only income is Social Security (no pension, IRA withdrawals, interest, dividends, etc.) and they file married filing jointly, here's the IRS worksheet math: Step Calculation Amount Total SS benefits $124,344 Half of benefits 124,344 × 50% $62,172 + other income none $0 Combined income $62,172 Less base amount 62,172 − 32,000 $30,172 Less second threshold 30,172 − 12,000 $18,172 (the $32k–$44k band) 50% of the $12,000 band $6,000 85% of the excess above $44,000 18,172 × 85% $15,446 Taxable SS benefit 6,000 + 15,446≈ $21,446Post: Tax Complications – How SS Benefits interact with Other Income
Link to comment from August 19, 2026
Andrew, thanks for a thoughtful, and thought-provoking, story. I'm happy your mother-in-law was able to receive quality care and wish her the best. As I write this, I'm sitting in our sun room that has a wall full of pictures of my wife's and my family. All 4 of her grandparents emigrated to America (2 from Ireland, 2 from Italy). They all left family behind, but none ever returned to their birth country. My wife's maternal grandmother left Sorrento, IT as a young woman to be a governess in America. She never saw her parents again. When I think about the birth lottery, the era you were born in makes a great difference. I'm glad that Joey, and you, can communicate instantly with Joey's mother, and visit, and consider living there part-time. I've written about the concept of societal wealth - it still fascinates me.
Post: The Lottery of Birth
Link to comment from August 19, 2026
Bill, thanks for the great information. I have also used IRS Direct Pay with no issues. I also enjoy playing the "how close to zero" game with our tax return. If I owe $1,000 or less at tax filing I consider it a win.
Post: If Retirement is Getting Close
Link to comment from August 19, 2026
Dan, great thoughts on a topic that is a big change for many of us. When I first started consulting at 60 my income was not regular, and I used form 2210 to annualize my income to prevent an underpayment and penalties/interest. My income varied from year to year, especially during Covid, so the safe harbor method (pay 100% of previous year's tax) wasn't always attractive. It gave me an appreciation for the challenges self-employed taxpayers face.
Post: If Retirement is Getting Close
Link to comment from August 19, 2026
Thanks Edmund. During my CFP classes we reviewed a paper that demonstrated that a well executed tax strategy could add up to 2 years to a retirement portfolio's life. That made an impression on me.
Post: Tax Complications – How SS Benefits interact with Other Income
Link to comment from August 18, 2026
Dan, you are right on. One of the challenges with TaxAide is you get minimal time with clients, and there are often ways you could help people who really need good advice. There are very good tools out there (like Dinkytown, AI, and many others) but I find many folks hate the topic.
Post: Tax Complications – How SS Benefits interact with Other Income
Link to comment from August 18, 2026
Those of us lucky to have a good pension will likely never have to worry about calculating the percentage of our SS benefits that are taxable. I just assume 85% for planning. My interest in financial and tax planing during retirement really came from taking care of my parents finances, and then my in-laws and my wife's aunt. My parents had very little, so it was more about squeaking every last dollar. My in-laws were well prepared, but my mother-in-law had significant longevity in her genes. When she developed dementia and required expensive care, it made sense to try to manage her finances as tax-efficiently as possible. With my wife's aunt, who also had dementia, it was more about finding lost assets, simplifying her assets, and protecting her. I guess I feel the same sense of concern for the TaxAide clients. It's hard to break old habits.
Post: Tax Complications – How SS Benefits interact with Other Income
Link to comment from August 18, 2026
Bill, As always thanks for the great information. My research matches with yours about the I bonds in the Gift Box. I will have to encourage my sons to create their TD accounts (if they haven't yet) and then transfer the gifted bonds. We also have used the UGift program for our grandson's 529. Maybe just focus on that. This weekend we were in Cooperstown, NY at a baseball tournament for our oldest grandson. At dinner the last night he convinced me to invest in a "Mystery Pack" of baseball cards. I happily forked over a few crisp $20s. I guess they are more tangible than a Treasury Direct gift announcement email. Cheers, Rick
Post: TreasuryDirect changing login procedure to mandate ID.me later in 2026
Link to comment from August 17, 2026