Social Security and Taxation

How much of your client's Social Security benefit is taxable?

The proportion of beneficiaries who must pay income tax on their Social Security benefits has risen over time and will continue to grow. With more people impacted by these taxes, it’s important that you’re able to explain how their benefits are taxed.

The calculation is complicated, but this taxable benefit calculator makes it simple for you to show clients how much of their benefit is taxable. Note that not everyone pays taxes on benefits. Social Security benefits weren’t subject to federal taxes originally. But after a funding crisis, the federal government in 1984 started taxing some higher-income beneficiaries. Clients who have other income in retirement other than Social Security likely will pay taxes on their benefit. If they earn more than a certain amount from those other sources while also collecting Social Security, you have to add a certain amount of their benefit payment to their taxable income on their tax return. Follow these steps to calculate the taxable portion of your client's Social Security. 

  • Step 1: Provisional Income – Your “provisional income” includes half of your Social Security benefits, plus all other taxable income, such as dividends, realized interest, and realized capital gains. This also includes non-taxable interest earnings, like those from municipal bonds.
  • Step 2: First Threshold – Subtract the first threshold and multiply by .5
  • Step 3: Second Threshold – Subtract the second threshold and multiply by .35
  • Step 4: Add the Answers
  • Step 5: Check the Max – Calculate and apply the maximum

Explaining how Social Security benefits are taxed is no easy task. Use Tax Clarity® to show clients how much of their benefit is taxable, how it interacts with other income streams, and help them see the value of an advisor who understands the intricacies of Social Security. 

Widow(er) Benefit

Explaining the Widow(er) Benefit

The Widow Calculation says that the surviving spouse receives the higher of his or her own benefit, or the benefit of the deceased, which may have been reduced or increased depending on if and when the deceased filed for Social Security benefits, but there are several layers of complexity to the Widow(er) Benefit that make it difficult to determine whether to claim Widow(er) Benefits early, when to wait, and when to switch to the survivor’s own benefit. There are actuarial reductions for the widow who claims early and a Widow Limit.

Some of the complications you could face when advising a widowed spouse on when to elect Social Security benefits: 

  • Two Different Full Retirement Ages — Widow(er)s actually have two different FRAs: their Retirement FRA and their Widow(er) FRA. For most people getting ready to elect Social Security today, their Retirement FRA is 66. Their Widow FRA is determined by subtracting two years from their date of birth and using that as their birth year in the standard FRA table. There is no advantage to delaying Widow(er) Benefits past the Widow’s FRA as there are no delayed retirement credits based on the Widow(er)’s claim age.
  • Actuarial Reductions — The surviving spouse can begin receiving Widow(er) Benefits as early as age 60. However, those benefits will be reduced up to a maximum of 28.5% due to claiming early. To determine the monthly reduction amount, simply take 28.5% divided by the number of months between age 60 and the Widow FRA determined in No. 1 above.
  • Widow(er) Limit — The Widow(er) Limit caps the Widow(er) benefit at the larger of the benefit the deceased would have received if he or she were still alive, or 82.5% of the deceased PIA. The Widow(er) Limit only comes into play if the deceased claimed benefits prior to his or her FRA.

Social Security Timing® includes a Widow Calculation so you can run scenarios for your widowed clients and help them determine when to claim benefits.


Recently proposed legislation could have a major impact on the future of Social Security. 

Social Security 2100 Act

Recently Representative John Larson (D-CT) Chair of the Social Security Subcommittee of the House Ways and Means Committee introduced new legislation to amend the Social Security program. Currently, the Social Security board of trustees projects the Social Security trust fund to exhaust its reserves by 2034. When that happens, there’s expected to be a dramatic reduction in scheduled benefits.The Social Security 2100 Act would:

  • provide an across-the-board benefit increase equivalent to about 2 percent of the average Social Security benefit. 
  • increase the minimum benefit to ensure that workers with many years of low earnings do not retire into poverty.
  • increase the payroll tax rate to 14.8 percent over the next 24 years, from 12.4 percent, and the payroll tax would be imposed on earnings over $400,000 a year.
  • cut federal income taxes for 12 million middle-income beneficiaries.


Sens. Joni Ernst (R-Iowa) and Mike Lee (R-Utah) recently introduced a new family leave proposal. The CRADLE Act would allow parents to postpone their Social Security benefits in exchange for paid family leave following the birth or adoption of a child. The current Social Security disability formula would be used to calculate the benefit.


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Take a 10-day free trial of Social Security Timing® and learn how you can help clients optimize their Social Security claiming strategy and increase their retirement value.

For the past decade, Social Security Timing® has been helping advisors answer client questions about Social Security, and it is now easier to use than ever. We've updated Social Security Timing, deeply integrated it with Income InSight® and added it to our portal. Accessing the software in the portal allows for deep integration with Covisum's Income InSight™ and SmartRisk® software. What else is new?

  • Cleaner interface
  • Better user experience
  • Easier navigations
  • New break-even chart
  • And more!