Will Stimulus Payments Make My Social Security Benefits Taxable?
Q: How will the stimulus payments that we received affect our income taxes for 2020? Will this increase the amount of Social Security benefits subject to tax?
A: Many retirees are wondering how the stimulus checks that they’ve received so far will impact taxes, especially Social Security benefits. First here’s how Social Security benefits are taxed.
Up to 85% of Social Security benefits are taxable if your provisional income is more than certain income thresholds. To determine provisional income, add 50% of your Social Security benefits, and any tax-exempt interest, to your adjusted gross income (AGI).
For married couples filing jointly, up to 50% of Social Security benefits are taxable if your provisional income is between $32,000 and $44,000. If your provisional income is more than $44,000, up to 85% of your Social Security benefits may be taxable.
If you are single, up to 50% of your Social Security benefits may be taxable if your provisional income is between $25,000 and $34,000. If your income is greater than $34,000, up to 85% of your benefits may be taxed.
Ordinarily, additional income generally increases your adjustable gross income, but the stimulus checks are not considered taxable income by the IRS. Instead they are an advanced payment of a new “recovery rebate” tax credit for 2020. In other words, the stimulus payments won’t increase your AGI or your provisional income, and thus won’t subject your Social Security benefits to greater taxation. You are also safe from additional taxation if you live in one of the few states that taxes Social Security benefits.
If you are eligible for a first or second round stimulus check but did not get it, or did not receive the full amount, you may be able to qualify for the “recovery rebate” credit on your 2020 tax return. You can claim the credit on your 2020 Form 1040 or Form 1040-SR. To learn more visit www.irs.gov.
