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Attention Ask Carrie Editors: The Following Column Was Originally Published In 2014. Thank You For Your Attention. -- Creators

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ATTENTION ASK CARRIE EDITORS: THE FOLLOWING COLUMN WAS ORIGINALLY PUBLISHED IN 2014. THANK YOU FOR YOUR ATTENTION. -- CREATORS

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Do You Have to Pay Income Taxes on Social Security Benefits?

Dear Carrie: From what I've read, if a married couple has annual withdrawals from 401(k) plans, individual retirement accounts or pensions that exceed a certain amount, the couple's Social Security benefits may be taxed. Is that true? -- A Reader

Dear Reader: You're absolutely right. When it comes to income taxes, many people think only of the money they earn in a paycheck. But the reality is there are many other types of income that are subject to ordinary income taxes. And all of that income, in turn, can trigger taxes on Social Security benefits -- which can come as an unwelcome surprise.

To determine whether your Social Security benefits will be taxed, the IRS uses what it calls your "combined income": the sum of your adjusted gross income, nontaxable interest and half of your Social Security benefits. If your combined income exceeds a certain limit, 50% to 85% of your benefits may be taxed.

 

All this is probably enough to send you running to your accountant. But before you do, let's go over some of the facts so you can have a more meaningful discussion.

Retirement Account Withdrawals That Are Subject to Income Tax

A withdrawal from a retirement account is considered ordinary income and is taxed as such, with a few exceptions, depending on the type of account. Here are the most common retirement accounts and how they're taxed:

-- Traditional IRA, 401(k), 403(b) or other employer-sponsored plan: Earnings and pretax contributions are taxed at ordinary income tax rates. If you made after-tax contributions, a portion of your withdrawal will be taxable and a portion will be tax-free.

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