Q: Is the income I receive from my IRA distribution included in the calculation that determines how much of my social security benefits will be taxed?
A: Generally, yes. If the IRA distribution you receive is taxable, like with a traditional IRA, and not a return of your previous non-deductible contributions, it will be included as part of your Adjusted Gross Income (AGI) on your tax return. The amount of your social security benefits that is taxable is determined by calculating your combined income. To find your combined income amount, add up your Adjusted Gross Income, plus your nontaxable interest, plus 50% of your social security benefits.
If your IRA distribution is taxable like with a traditional IRA, it should be included in your Adjusted Gross Income, so that it’s easy to determine what portion of your social security benefits are taxable.
If you know your federal tax filing status and your combined income, you can use the following guidelines from the Social Security Administration to see how much of your benefits are taxable.
If you file a federal tax return as an individual and your combined income is the following:
- Between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits.
- More than $34,000, up to 85 percent of your benefits may be taxable.
If you file a joint return, and you and your spouse have a combined income that is:
- Between $32,000 and $44,000, you may have to pay income tax on up to 50 percent of your benefits.
- More than $44,000, up to 85 percent of your benefits may be taxable.
If you are married and file a separate tax return, you probably will pay taxes on your benefits.
For more information about calculating your “combined income” or the taxation of social security benefits visit the Social Security Administration’s website at www.ssa.gov.