Social Security Income and Tax Returns: How They Correlate and When You Should File

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If your entire income is from monthly Social Security payments, you might not need to file a federal tax return if you fall under a certain financial threshold. But even when that’s the case, there could be times when you’re better off filing a return.

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Find: Social Security — Use This IRS Form To Have Federal Income Tax Withheld

As a general rule, if Social Security benefits were your only income, your benefits
are not taxable and you probably don’t need to file a federal income tax return, according to the Social Security Administration. But if you received Social Security benefits plus other income, your tax obligation depends on how much you earned.

You must pay taxes on your Social Security benefits if you file a federal tax return as an individual and your combined income exceeds $25,000 a year. If you file a joint return, you must pay taxes if you and your spouse have combined income of more than $32,000. If you are married and file a separate return, you probably will have to pay taxes on your benefits, the SSA says.

But even if you don’t technically have to file a federal return, there are situations when you probably should.

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For example, if you had any tax withheld during the year — either from Social Security payments themselves or from any other sources, such as quarterly estimated tax payments or carried-over refunds from prior years — you should file a return, MarketWatch reported. In many cases you’ll get most, if not all, of those taxes back in a refund.

Explore: Retirement – These 13 States Tax Your Social Security Money

If you were due an economic impact payment in 2021 but didn’t get it, you should file a tax return to claim the payment as a recovery rebate credit.

You should also file a return if you earned other income from investments, including interest, dividends and gains from the sale of investments. Even tax-exempt income from municipal bonds or U.S. savings bond interest can push your income above the threshold. If that’s the case, you should file a federal tax return.

Here are some other examples of when you might need to file a return, according to MarketWatch:

  • If you are a dependent of someone else or someone else is your dependent. In these situations, there could be income complications that require filing a tax return.
  • If you or someone else, such as a spouse or dependent, has health insurance coverage through an Affordable Care Act Marketplace, you might need to file a return to reconcile premium adjustments and credits.
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Also, if you used a health savings account to pay for medical expenses during the past year, you must file a tax return to account for those withdrawals against your qualified medical expenses.

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About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.
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