How Much Money You Can Make Tax-Free in 2025 If You Are on Social Security
Written by
Nicholas Morine
Edited by
Levi Leidy
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Many retirees are unaware that Social Security benefits are indeed subject to taxation — at least if your earnings are above a certain threshold.
According to Charles Schwab, the amount depends on your filing status (single filer, head of household, married filing jointly, etc.) and your combined income for the year.
The formula employed by the Social Security Administration (SSA) relies on your combined income — your adjusted gross income (AGI) before consideration of your SSA income, added to earnings from nontaxable interest as well as half of your Social Security benefits. Your spouse’s income must also be included if you’re filing jointly, although any supplemental security income (SSI) is not included, as it’s nontaxable, per the SSA.
Charles Schwab condensed some of the pertinent information related to adjusted gross income calculations thusly. Take a look below.
Also, find out the common mistakes retirees make with their Social Security checks.
How Does It Work?
“AGI generally comprises wages, interest, investments gains, dividends, and taxable distributions from retirement plans, minus certain adjustments to income,” per the investment company.
The SSA provided the following thresholds, below which income will be exempt from federal taxation.
- $25,000 if you’re single, head of household, or qualifying surviving spouse,
- $25,000 if you’re married filing separately and lived apart from your spouse for the entire year,
- $32,000 if you’re married filing jointly,
- $0 if you’re married filing separately and lived with your spouse at any time during the tax year.
For those exceeding these thresholds, taxation values vary. Charles Schwab indicated that for single filers, head of household, or qualifying widows or widowers, a combined annual income of between $25,000 to $34,000 could see the taxable portion of Social Security benefits reach up to 50%, or 80% for those earning more than $34,000.
Concerning those married, filing jointly, and earning between $32,000 and $44,000, up to 50% of benefits could be taxable. Those in this category earning more than $44,000 could see up to 85% of benefits considered taxable.
It should also be remembered, as the financial services company pointed out, that residents of Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, or West Virginia could also see state taxes imposed on Social Security benefits.
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