Are Social Security Benefits Taxed in Arizona?

by Rod Howell ; Updated July 27, 2017
Current or ex-spouses receive Social Security benefits at any age if caring for minor children.

In Arizona, you’re entitled to survivor's, retirement and disability benefits from the Social Security Administration. Billions of dollars each year are paid to beneficiaries living in Arizona. Once you meet the qualifications of the federally-funded programs, you are paid benefits that are not considered taxable compensation by themselves. However, when combined with other sources of income, the Internal Revenue Service may tax over half of your Social Security benefits at regular income-tax rates.

Benefits

The three programs paid more than $1.1 billion in monthly Social Security benefits to more than 1 million Arizona beneficiaries in 2009. Among the beneficiaries who received Social Security payments that year were 75,000 children and 46,000 spouses. Arizona, along with Hawaii, California and Nevada, make up the Social Security Administration's San Francisco region, which has millions of beneficiaries who receive more than $92 billion in benefit payments annually.

Requirements

Each benefit program has its own guidelines, but there are some general requirements that fit all three. You must have paid into Social Security during your years of employment. You must also have accumulated the required number of work credits. A work credit represents three months, or a quarter, of earnings. As of 2011, you can earn a maximum of four credits in one year. You earn a work credit when you make $1,120 and you need $4,480 to get the maximum. Generally you need 40 work credits -- equal to 10 years -- for all three programs, but you can qualify with less under certain circumstances, such as if you were to die or become disabled before reaching the stated amount.

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Taxable Benefits

If you have sources of taxable income -- such as wages and dividends -- to report on your tax returns, the amounts, combined with your Social Security benefits, could cause the IRS to tax your benefit payments at normal income-tax rates. Up to 50 or 85 percent of your benefits are taxed if your total income tops $25,000 or $34,000 respectively. If you’re married and the combined household incomes exceed $32,000 and $44,000, the IRS taxes up to 50 and 85 percent of your benefits, respectively.

Considerations

You are able to work and receive Social Security retirement and disability checks simultaneously, but doing so will reduce your benefit amounts. You are also able to receive checks from private and public disability sources while getting Social Security disability benefits. Besides yourself, your spouse, dependent children up to age 18 or 19 if they’re in secondary schools, and ex-spouse are eligible to receive Social Security benefit payments off of your earnings record. Payment amounts vary by program; retirement and disability payments to family members can be up to 50 percent of your full benefit rate, while survivor's benefits can be as high as 100 percent. However, there are limits to how much your family receives and the Social Security Administration reduces their payments proportionately to keep their benefit amounts under the caps. The amount received by your ex-spouse does not affect how much your current family gets.

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