Combined Income

• The IRS bases Social Security taxation on combined income. You receive an SSA-1099 form at the beginning of the calendar year listing income received from Social Security benefits for the past year. You may use the worksheet provided by the Internal Revenue Service in Publication 915 or Publication 17 to calculate combined income or you may estimate without a worksheet. Add your adjusted gross income from your income taxes, plus half of your Social Security for the year. To that total, add any nontaxable interest you may have. The result is your combined income, a figure used to calculate your Social Security taxation for federal income taxes.
  
  

Lower Taxable Limits

• If your combined income is below $25,000, you owe no federal income taxes on Social Security benefits. If you file federal taxes as an individual, the IRS taxes 50 percent of your Social Security if your combined income is between $25,000 and $34,000. Joint filers see taxation of Social Security benefits starting at $32,000. The 50-percent tier for joint filers stops at $44,000.
  
  

Second Tier Taxes

• Individual filers whose combined income is in excess of $34,000 incur taxation of 85 percent of Social Security benefits. The 85-percent tier for married filing jointly starts at $44,000. If you can keep your combined income for the year below the second-tier threshold, you may be able to save on your taxes.
  
  

Tax-Free Benefits

• Fifteen percent of all Social Security benefits payments are tax-free, since the maximum taxation is at the 85-percent level, regardless of combined income figures for the taxpayer. If you owe any taxes on Social Security benefits, you cannot use Form 1040-EZ to file your federal income taxes.
  
  

Withholding Taxes

• You may have Social Security withhold federal income taxes so you are not surprised at tax time. Obtain and file Form W-4V for voluntary withholding to make this work for you. Choose the percentage of your Social Security payment you want withheld. Your choices are 7 percent, 10 percent, 15 percent or 25 percent. If you constantly come up short on withholding, you may choose to have a larger percentage withheld from your Social Security benefits to cover other income sources.