Social Security and 
Equivalent Railroad  
Retirement Benefits(p13)

This discussion explains the federal income tax rules for social security benefits and equivalent tier 1 railroad retirement benefits.

Social security benefits include monthly retirement, survivor, and disability benefits. They do not include supplemental security income (SSI) payments, which are not taxable.

Equivalent tier 1 railroad retirement benefits are the part of tier 1 benefits that a railroad employee or beneficiary would have been entitled to receive under the social security system. They commonly are called the social security equivalent benefit (SSEB) portion of tier 1 benefits.

If you received these benefits during 2010, you should have received a Form SSA-1099 or Form RRB-1099 (Form SSA-1042S or Form RRB-1042S if you are a nonresident alien), showing the amount of the benefits.

To find out whether any of your benefits may be taxable, compare the base amount for your filing status (explained later) with the total of:

• One-half of your benefits, plus
• All your other income, including tax-exempt interest.

When making this comparison, do not reduce your other income by any exclusions for:

• Interest from qualified U.S. savings bonds,
• Employer-provided adoption benefits,
• Foreign earned income or foreign housing, or
• Income earned in American Samoa or Puerto Rico by bona fide residents.

To figure the total of one-half of your benefits plus your other income, use Worksheet 2-B. If that total amount is more than your base amount, part of your benefits may be taxable.

If you are married and file a joint return for 2010, you and your spouse must combine your incomes and your benefits to figure whether any of your combined benefits are taxable. Even if your spouse did not receive any benefits, you must add your spouse's income to yours to figure whether any of your benefits are taxable.

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Worksheet 2-B. Are Any of Your Benefits Taxable? A. Enter the amount from box 5 of all your Forms SSA-1099 and RRB-1099. Include the full amount of any lump-sum benefit payments received in 2010, for 2010 and earlier years. (If you received more than one form, combine the amounts from box 5 and enter the total.) A.   Note. If the amount on line A is zero or less, stop here; none of your benefits are taxable this year.     B. Enter one-half of the amount on line A B. C. Enter your taxable pensions, wages, interest, dividends, and other taxable income C. D. Enter any tax-exempt interest income (such as interest on municipal bonds) plus any exclusions from income for:  • Interest from qualified U.S. savings bonds,  • Employer-provided adoption benefits,  • Foreign earned income or foreign housing, or  • Income earned in American Samoa or Puerto Rico by bona fide residents D. E. Add lines B, C, and D and enter the total E. F. If you are:  • Married filing jointly, enter $32,000  • Single, head of household, qualifying widow(er), or married filing separately and you   lived apart from your spouse for all of 2010, enter $25,000  • Married filing separately and you lived with your spouse at any time during 2010,   enter -0- F. G. Is the amount on line F less than or equal to the amount on line E?   No. None of your benefits are taxable this year.   Yes. Some of your benefits may be taxable. To figure how much of your benefits       are taxable, see Which worksheet to use under How Much Is Taxable, later.

Your base amount is:

• $25,000 if you are single, head of household, or qualifying widow(er),
• $25,000 if you are married filing separately and lived apart from your spouse for all of 2010,
• $32,000 if you are married filing jointly, or
• $0 if you are married filing separately and lived with your spouse at any time during 2010.

Any repayment of benefits you made during 2010 must be subtracted from the gross benefits you received in 2010. It does not matter whether the repayment was for a benefit you received in 2010 or in an earlier year. If you repaid more than the gross benefits you received in 2010, see Repayments More Than Gross Benefits, later.

Your gross benefits are shown in box 3 of Form SSA-1099 or Form RRB-1099. Your repayments are shown in box 4. The amount in box 5 shows your net benefits for 2010 (box 3 minus box 4). Use the amount in box 5 to figure whether any of your benefits are taxable.

You can choose to have federal income tax withheld from your social security and/or the SSEB portion of your tier 1 railroad retirement benefits. If you choose to do this, you must complete a Form W-4V, Voluntary Withholding Request. You can choose withholding at 7%, 10%, 15%, or 25% of your total benefit payment.

If you do not choose to have income tax withheld, you may have to request additional withholding from other income, or pay estimated tax during the year. For details, see Publication 505, Tax Withholding and Estimated Tax, or the Instructions for Form 1040-ES, Estimated Tax for Individuals.

If part of your benefits is taxable, how much is taxable depends on the total amount of your benefits and other income. Generally, the higher that total amount, the greater the taxable part of your benefits.

The taxable part of your benefits usually cannot be more than 50%. However, up to 85% of your benefits can be taxable if either of the following situations applies to you.

• The total of one-half of your benefits and all your other income is more than $34,000 ($44,000 if you are married filing jointly).
• You are married filing separately and lived with your spouse at any time during 2010.

If you are a nonresident alien, 85% of your benefits are taxable. However, this income is exempt under some tax treaties.

A worksheet to figure your taxable benefits is in the Instructions for your Form 1040 or 1040A. However, you will need to use a different worksheet(s) if any of the following situations applies to you.

1. You contributed to a traditional IRA and you or your spouse were covered by a retirement plan at work. In this situation, you must use the special worksheets in Appendix B of Publication 590 to figure both your IRA deduction and your taxable benefits.
2. Situation (1) does not apply and you take an exclusion for interest from qualified U.S. savings bonds (Form 8815), for employer-provided adoption benefits (Form 8839), for foreign earned income or housing (Form 2555 or Form 2555-EZ), or for income earned in American Samoa (Form 4563) or Puerto Rico by bona fide residents. In this situation, you must use Worksheet 1 in Publication 915 to figure your taxable benefits.
3. You received a lump-sum payment for an earlier year. In this situation, also complete Worksheet 2 or 3 and Worksheet 4 in Publication 915. See Lump-Sum Election, later.

If part of your benefits are taxable, you must use Form 1040, Form 1040A, or Form 1040NR. You cannot use Form 1040EZ.

Report your net benefits (the amount in box 5 of your Form SSA-1099 or Form RRB-1099) on line 20a and the taxable part on line 20b. If you are married filing separately and you lived apart from your spouse for all of 2010, also enter "D" to the right of the word "benefits" on line 20a.

Report your net benefits (the amount in box 5 of your Form SSA-1099 or Form RRB-1099) on line 14a and the taxable part on line 14b. If you are married filing separately and you lived apart from your spouse for all of 2010, also enter "D" to the right of the word "benefits" on line 14a.

Report 85% of the total amount of your benefits (box 5 of your Form SSA-1042S or Form RRB-1042S) in the appropriate column of line 8 of Form 1040-NR, Schedule NEC.

If you are filing Form 1040EZ, do not report any benefits on your tax return. If you are filing Form 1040 or Form 1040A, report your net benefits (the amount in box 5 of your Form SSA-1099 or Form RRB-1099) on Form 1040, line 20a, or Form 1040A, line 14a. Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. If you are married filing separately and you lived apart from your spouse for all of 2010, also enter "D" to the right of the word "benefits" on Form 1040, line 20a, or Form 1040A, line 14a.

You must include the taxable part of a lump-sum (retroactive) payment of benefits received in 2010 in your 2010 income, even if the payment includes benefits for an earlier year.

Generally, you use your 2010 income to figure the taxable part of the total benefits received in 2010. However, you may be able to figure the taxable part of a lump-sum payment for an earlier year separately, using your income for the earlier year. You can elect this method if it lowers your taxable benefits. See Publication 915 for more information.

In some situations, your Form SSA-1099 or Form RRB-1099 will show that the total benefits you repaid (box 4) are more than the gross benefits (box 3) you received. If this occurred, your net benefits in box 5 will be a negative figure (a figure in parentheses) and none of your benefits will be taxable. If you receive more than one form, a negative figure in box 5 of one form is used to offset a positive figure in box 5 of another form for that same year.

If you have any questions about this negative figure, contact your local SSA office or your local RRB field office.

If you and your spouse file a joint return, and your Form SSA-1099 or RRB-1099 has a negative figure in box 5 but your spouse's does not, subtract the amount in box 5 of your form from the amount in box 5 of your spouse's form. You do this to get your net benefits when figuring if your combined benefits are taxable.

If the total amount shown in box 5 of all of your Forms SSA-1099 and RRB-1099 is a negative figure, you can take an itemized deduction for the part of this negative figure that represents benefits you included in gross income in an earlier year.

If this deduction is $3,000 or less, it is subject to the 2%-of-adjusted-gross-income limit that applies to certain miscellaneous itemized deductions. Claim it on Schedule A (Form 1040), line 23.

If this deduction is more than $3,000, you have to follow some special instructions. See Publication 915 for those instructions.