For Federal income tax, how your social security benefits are taxed is based on your income level. According to Social Security Administration, benefits are taxed as follows:
If you file as "single" on your federal income tax return and your combined income is:
- Between $25,000 and $34,000, you may have to pay income tax on up to 50% of your social security benefits
- More than $34,000, up to 85% of your social security benefits may be taxable
If you file as married filing jointly, and your and your spouse have a combined income of:
- Between $32,000 and $44,000, you may have to pay income tax on up to 50% of your social security benefits
- More than $44,000, up to 85% of your social security benefits may be taxable
How to Calculate "Combined Income"?
Combined Income is calculated as the sum of your adjusted gross income (not including your social security benefits), your nontaxable interest (e.g. municipal bond interests), and half of your social security benefits
Once you have combined income, you can compare it with the income numbers mentioned above to determine what percentage of your social security benefits will be taxable. Since pension income is part of your adjusted gross income, it will have an impact on how much of your social security benefits are taxable.