Is Social Security Taxed in California?

Individuals receiving Social Security benefits often wonder about the tax implications of this income. Understanding whether these benefits are subject to taxation, both at the federal and state levels, is a common concern for retirees and beneficiaries. The rules governing the taxation of Social Security can be complex, with different criteria determining how much, if any, of these benefits are considered taxable income. This often leads to questions about how to account for this income when filing tax returns.

Federal Taxability of Social Security Benefits

The federal government may tax a portion of Social Security benefits, including retirement, survivor, and disability benefits, depending on a taxpayer’s overall income. The Internal Revenue Service (IRS) uses a calculation involving what is known as “provisional income” to determine this taxability. Provisional income is calculated by taking your adjusted gross income (AGI), adding any tax-exempt interest income, and then adding 50% of your Social Security benefits received during the year.

Once provisional income is determined, different thresholds apply to specify how much of the benefits are taxable. For single filers, if provisional income is between $25,000 and $34,000, up to 50% of Social Security benefits may be subject to federal income tax. If a single filer’s provisional income exceeds $34,000, up to 85% of their Social Security benefits could be taxable.

For married couples filing jointly, the thresholds are higher; if their combined provisional income is between $32,000 and $44,000, up to 50% of their Social Security benefits may be taxable. Should their provisional income surpass $44,000, up to 85% of their Social Security benefits may become taxable.

California State Tax on Social Security Benefits

California’s approach to taxing Social Security benefits differs significantly from the federal rules. A notable benefit for residents is that California does not tax Social Security benefits. This exemption applies to all types of Social Security income, including retirement, survivor, and disability benefits.

This means that regardless of a beneficiary’s income level or whether their Social Security benefits are subject to federal taxation, California state income tax will not be imposed on these amounts. This distinguishes California’s tax laws from federal guidelines that may require a portion of these benefits to be taxed.

Reporting Social Security Benefits for Tax Purposes

When preparing federal income tax returns, individuals receiving Social Security benefits will use Form SSA-1099, the Social Security Benefit Statement, which is mailed to them annually. The total amount of benefits received for the year, as shown in Box 5 of Form SSA-1099, is reported on Line 6a of Form 1040 or Form 1040-SR. The taxable portion of these benefits, calculated based on provisional income thresholds, is then reported on Line 6b of the same form.

For California state income tax purposes, even though Social Security benefits are not taxable, they might still need to be accounted for on the state return. If any portion of Social Security benefits was included in your federal adjusted gross income, an adjustment is made to exclude this income from your California taxable income. This is done as a subtraction on Schedule CA (Form 540), which reconciles federal and state income.