How to Avoid the Social Security Tax Trap

How to Avoid the Social Security Tax Trap

How much of your Social Security income is taxable? Depending on the amount of your Social Security benefits and other income—including tax-free interest on municipal bonds and certain other excludable amounts—your benefits are included with other taxable income at the rate of 85%, 50% or zero. To know whether your Social Security benefits will be partially taxed or fully tax-free you need to follow formulas unique to this determination.