Taxpayers may count on receiving a refund if they have overpaid their taxes the previous year. This can happen if your employer withholds too much from your paychecks, which they do according to the information you provided on your W-4. If you’re self-employed, you could be due a refund if you overpaid your estimated quarterly taxes.
But what if your income is all from Social Security? Would you qualify for a tax refund?
First of all, Texas does not tax Social Security benefits. A tax refund based on Social Security income is not an issue on your state taxes in Texas.
Understanding Social Security Benefits and Federal Taxation
Social Security benefits include monthly:
- Retirement benefits, which replace a portion of a retiree’s income after they stop working or reduce their work hours. The benefit amount is based on the worker’s lifetime earnings and when they start receiving benefits.
The maximum monthly Social Security retirement benefit in 2024 depends on how old you are when you retire:
- Age 62: The maximum benefit is $2,710 per month; $35,520 per year.
- Full retirement age (between 66 and 67): The maximum benefit is $3,822 per month; $45,864 per year.
- Age 70: The maximum benefit is $4,873 per month; $58,476 per year.
- Survivor benefits are paid to the family members of a deceased worker who paid Social Security taxes. They may be paid to the surviving spouse, a divorced spouse, a child, or a dependent parent. The benefits are based on the deceased worker’s earnings and the survivor’s relationship and age.
- Survivor benefit recipients may be subject to earnings limits, which vary by age. If a recipient earns more than the limit in a year, his or her payment will be temporarily reduced.
- Disability benefits are paid to workers who have become disabled by an injury or illness that ends or limits their ability to work for a living.
The maximum monthly Social Security Disability Insurance (SSDI) benefit in 2024 is $3,822, or $45,864 annually. However, the average monthly benefit is much lower, at around $1,537, or $18,444 per year.
The Social Security Administration (SSA) also distributes Supplemental Security Income (SSI) payments, which are not taxable.
Social Security benefits must be reported as income for tax purposes. The taxable portion counted as income and used to calculate your income tax liability depends on the total income and benefits for the taxable year.
Your benefits may be taxable if the sum of one-half of the benefits on your Social Security benefit statement, plus all your other income, exceeds the base amount for your filing status. The base amount for your filing status is:
- $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 living with your spouse at any time during the tax year.
If you’re married and file a joint tax return, you and your spouse must combine your incomes and Social Security benefits when figuring the taxable portion of your benefits. Even if your spouse didn’t receive any benefits, you must add your spouse’s income to yours when figuring on a joint return if any of your benefits are taxable.
Some recipients of Social Security Disability Insurance may not make enough to be required to pay federal taxes if disability benefits are their only source of income.
Federal Taxes Withheld From Your Social Security
A Social Security recipient must notify the SSA if they want federal taxes withheld from their monthly Social Security checks. The withholding options are 7%, 10%, 12%, or 22% of the monthly benefit.
Taxes withheld prepay a portion of the year’s tax bill.
Income taxes are assessed according to the amount of income accrued each year. For tax year 2024, the top marginal tax rate is 37% for individual single taxpayers with incomes greater than $609,350 ($731,200 for married couples filing jointly).
The other rates are:
- 35% for incomes over $243,725 ($487,450 for married couples filing jointly)
- 32% for incomes over $191,950 ($383,900 for married couples filing jointly)
- 24% for incomes over $100,525 ($201,050 for married couples filing jointly)
- 22% for incomes over $47,150 ($94,300 for married couples filing jointly)
- 12% for incomes over $11,600 ($23,200 for married couples filing jointly)
The lowest rate is 10% for single individuals with incomes of $11,600 or less ($23,200 for married couples filing jointly).
The standard deduction for married couples filing jointly for tax year 2024 is $29,200. For single taxpayers and married individuals filing separately, the standard deduction is $14,600. For heads of households, the standard deduction is $21,900.
Typically, a tax refund is paid if the taxpayer has had more taxes withheld than they are ultimately required to pay in income tax for that tax year. Even if you didn’t pay tax, you may still get a refund if you qualify for a refundable credit.
To get a tax refund, you must file a tax return.
Could a Refundable Tax Credit Lead to a Refund?
A refundable tax credit is a credit taxpayers can get as a refund even when they don’t owe any tax.
Tax credits are amounts you can subtract from your taxes due when you file your tax return. Most tax credits can reduce your tax only until it reaches $0. Refundable credits go beyond that to give you any remaining credit as a refund.
Refundable tax credits currently available include:
- Earned Income Tax Credit. To qualify for an Earned Income Tax Credit, you must have under $11,000 in investment income and earn less than a specific income level from working. If Social Security benefits are your only source of income, you would not qualify for this credit meant to help low- to moderate-income workers and families get a tax break.
- Child Tax Credit. You may be eligible for the Child Tax Credit if you have a child. For 2024, the credit is up to $2,000 per qualifying child. To qualify, a child must:
- Have a Social Security number
- Be under the age of 17 at the end of 2024
- Be claimed as a dependent on your tax return.
A portion of the Child Tax Credit, called the Additional Child Tax Credit (ACTC), is refundable. For 2024, up to $1,900 per child may be refundable.
- American Opportunity Tax Credit. If you paid qualified education expenses for an eligible college student, you can claim a credit of up to $2,500 per year. Up to $1,000 of the American Opportunity Tax Credit is refundable. Your income must be $90,000 or less ($180,000 or less for married filing jointly) to claim the credit.
- Premium Tax Credit. If you buy health insurance through the Health Insurance Marketplace and meet other criteria, you can claim the Premium Tax Credit. This is a refundable credit based on your income and the cost of your healthcare plan.
Do You Have Specific Questions? Contact Our Law Firm Today
We urge you to consult your accountant or tax advisor when preparing to file a federal income tax return. When considering hiring a Dallas social security disability lawyer, Kraft & Associates, Attorneys at Law, P.C., can advise you about eligibility and file a claim on your behalf. We’ll work to recover the maximum benefit available to you or your loved one. Contact us today for help. We do not charge a fee unless we recover money for you.
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