Some states tax Social Security benefits, but California is not one of them. Included in these non-taxable benefits are survivor's and disability benefits. However, just because the state of California does not tax Social Security benefits does not mean that you cannot be taxed at the federal level. Depending on the amount of income you receive from other sources, you can be taxed up to 85 percent of your benefits by the IRS. However, single filers with less than $25,000 in combined income, and joint filers with less than $34,000 combined income, will not owe any taxes on Social Security benefits.
Taxation at the Federal Level
For tax purposes, the IRS considers your Social Security benefits as taxable income, but not everyone must pay taxes on these benefits. Whether you will have to file taxes on your retirement benefits is determined by a set of income thresholds and rules issued by the IRS. Usually, people who have to pay taxes on their benefits also have other qualifying income in addition to their retirement benefits. Some qualifying sources of other income can be wages from a job or self-employment, interest and dividends, or any other taxable income.
If you're filing as an individual with a combined income between $25,000 and $34,000, you may be taxed up to 50 percent of your benefits. Single filers earning more than $34,000 a year in taxable income may have up to 85 percent of their Social Security benefits taxed. Joint filers with a combined income between $32,000 and $44,000 might be taxed up to 50 percent of their benefits, while those with more than $44,000 in combined income may be taxed up to 85 percent. Also, filers who are married filing separately can likely expect to have their Social Security benefits taxed at some level. To determine your combined income, simply take your adjusted gross income, plus half of your Social Security benefits, plus nontaxable interest.
How Are My Social Security Benefits Determined?
Workers over the age of 18 can find out how much in Social Security benefits they are entitled to by going to the Social Security Administration's website and using the online Retirement Estimator to request a Social Security statement. The Social Security Administration stopped mailing anyone under the age of 60 paper statements in 2017, so going online and creating an account at ssa.gov/myaccount/ is the only way to check your statement if you're under 60.
Your benefits are determined by your lifetime earnings. These earnings are adjusted to consider changes in average wages over the 35 years you've earned the most income. The Social Security Administration then applies a formula to these earnings to figure your basic benefits. These benefits are what you receive when you reach the full retirement age of 65 or older, depending on when you were born.
Certain factors can increase or decrease the amount of retirement benefits you receive. If you choose to start receiving benefits before you reach full retirement age, you will receive reduced benefits. Delaying retirement past the full retirement age (based on the year you were born) will increase your Social Security benefits by a certain percentage. Your benefits will increase either until you reach the age of 70, or you begin taking the benefits. Beginning at age 62, each year you can expect a cost-of-living increase added to your retirement benefits. You will receive this cost-of-living increase even if you don't take retirement benefits until you reach full retirement age, or up to age 70.
- California Tax Information Center: Special Circumstances
- SSA: How Work Affects Your Benefits
- SSA: Benefits Planner: Income Taxes And Your Social Security Benefits
- AARP: Are My Social Security Benefits Taxable?
- SSA: Your Retirement Benefit – How It’s Figured
- SSA: Retirement Estimator
- U.S. News: 5 Things to Know About Your Social Security Statement
- Jupiterimages/Brand X Pictures/Getty Images