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This publication explains the federal income tax rules for social security benefits and equivalent tier 1 railroad retirement benefits. It is prepared through the joint efforts of the Internal Revenue Service (IRS), the Social Security Administration (SSA), and the U.S. Railroad Retirement Board (RRB).

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 are commonly 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, Social Security Benefit Statement, or Form RRB-1099, Payments by the Railroad Retirement Board (Form SSA-1042S, Social Security Benefit Statement, or Form RRB-1042S, Statement for Nonresident Alien Recipients of: Payments by the Railroad Retirement Board, if you are a nonresident alien) showing the amount.

This publication covers the following topics:

• Whether any of your benefits are taxable,
• How much is taxable,
• How to report taxable benefits,
• How to treat lump-sum benefit payments, and
• Deductions related to your benefits, including a deduction or credit you can claim if your repayments are more than your gross benefits.

The Appendix at the end of this publication explains items shown on your Form SSA-1099, SSA-1042S, RRB-1099, or RRB-1042S.

This publication does not cover the tax rules for the following railroad retirement benefits:

• Non-social security equivalent benefit (NSSEB) portion of tier 1 benefits,
• Tier 2 benefits,
• Vested dual benefits, and
• Supplemental annuity benefits.

For information on these taxable pension benefits, see Publication 575, Pension and Annuity Income.

This publication also does not cover the tax rules for foreign social security benefits. These benefits are taxable as annuities, unless they are exempt from U.S. tax or treated as a U.S. social security benefit under a tax treaty.

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

1. One-half of your benefits, plus
2. 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 by bona fide residents of American Samoa or Puerto Rico.

The rules in this publication apply to benefits received by children. See Who is taxed, later.

To figure the total of one-half of your benefits plus your other income, use Worksheet A, discussed later. If the total 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.

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.

You can use Worksheet A to figure the amount of income to compare with your base amount. This is a quick way to check whether some of your benefits may be taxable.

taxmap/pubs/p915-000.htm#id2010_w15320p03

Worksheet A. A Quick Way To Check if Your Benefits May Be Taxable Keep for your records 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 (listed earlier) D. E. Add lines B, C, and D E. Note. Compare the amount on line E to your base amount for your filing status. If the amount on line E equals or is less than the base amount for your filing status, none of your benefits are taxable this year. If the amount on line E is more than your base amount, some of your benefits may be taxable. You need to complete Worksheet 1, shown later. If none of your benefits are taxable, but you otherwise must file a tax return, see Benefits not taxable, later, under How To Report Your Benefits.

You and your spouse (both over 65) are filing a joint return for 2010 and you both received social security benefits during the year. In January 2011, you received a Form SSA-1099 showing net benefits of $7,500 in box 5. Your spouse received a Form SSA-1099 showing net benefits of $3,500 in box 5. You also received a taxable pension of $22,000 and interest income of $500. You did not have any tax-exempt interest income. Your benefits are not taxable for 2010 because your income, as figured in Worksheet A on the next page, is not more than your base amount ($32,000) for married filing jointly.

Even though none of your benefits are taxable, you must file a return for 2010 because your taxable gross income ($22,500) exceeds the minimum filing requirement amount for your filing status.

taxmap/pubs/p915-000.htm#id2010_w15320p04

Filled-in Worksheet A. A Quick Way To Check if Your Benefits May Be Taxable Keep for your records 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. $11,000 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. 5,500 C. Enter your taxable pensions, wages, interest, dividends, and other taxable income C. 22,500 D. Enter any tax-exempt interest income (such as interest on municipal bonds) plus any exclusions from income (listed earlier) D. -0- E. Add lines B, C, and D E. $28,000 Note. Compare the amount on line E to your base amount for your filing status. If the amount on line E equals or is less than the base amount for your filing status, none of your benefits are taxable this year. If the amount on line E is more than your base amount, some of your benefits may be taxable. You need to complete Worksheet 1, shown later. If none of your benefits are taxable, but you otherwise must file a tax return, see Benefits not taxable, later, under How To Report Your Benefits.

Benefits are included in the taxable income (to the extent they are taxable) of the person who has the legal right to receive the benefits. For example, if you and your child receive benefits, but the check for your child is made out in your name, you must use only your part of the benefits to see whether any benefits are taxable to you. One-half of the part that belongs to your child must be added to your child's other income to see whether any of those benefits are taxable to your child.

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.

In 2009, you received $3,000 in social security benefits, and in 2010 you received $2,700. In March 2010, SSA notified you that you should have received only $2,500 in benefits in 2009. During 2010, you repaid $500 to SSA. The Form SSA-1099 you received for 2010 shows $2,700 in box 3 (gross amount) and $500 in box 4 (repayment). The amount in box 5 shows your net benefits of $2,200 ($2,700 minus $500).

You can choose to have federal income tax withheld from your social security benefits 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.

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 or the instructions for Form 1040-ES.

U.S. citizens who are residents of the following countries are exempt from U.S. tax on their benefits.

• Canada.
• Egypt.
• Germany.
• Ireland.
• Israel.
• Italy. (You must also be a citizen of Italy for the exemption to apply.)
• Romania.
• United Kingdom.

The SSA will not withhold U.S. tax from your benefits if you are a U.S. citizen.

The RRB will withhold U.S. tax from your benefits unless you file Form RRB-1001, Nonresident Questionnaire, with the RRB to provide citizenship and residency information. If you do not file Form RRB-1001, the RRB will consider you a nonresident alien and withhold tax from your railroad retirement benefits at a 30% rate. Contact the RRB to get this form.

For U.S. income tax purposes, lawful permanent residents (green card holders) are considered resident aliens until their lawful permanent resident status under the immigration laws is either taken away or is administratively or judicially determined to have been abandoned. Social security benefits paid to a green card holder are not subject to 30% withholding. If you are a green card holder and tax was withheld in error on your social security benefits because you have a foreign address, the withholding tax is refundable by the Social Security Administration (SSA) or the IRS. SSA will refund taxes erroneously withheld if the refund can be processed during the same calendar year in which the tax was withheld. If SSA cannot refund the taxes withheld, you must file a Form 1040 or 1040A with the Internal Revenue Service Center, Austin, TX 73301 to determine if you are entitled to a refund. You must also attach the following information to your Form 1040 or 1040A:

• A copy of the Form SSA-1042S, Social Security Benefit Statement,
• A copy of the "green card," and
• A signed declaration that includes the following statements:

"The SSA should not have withheld federal income tax from my social security benefits because I am a U.S. lawful permanent resident and my green card has been neither revoked nor administratively or judicially determined to have been abandoned. I am filing a U.S. income tax return for the tax year as a resident alien reporting all of my worldwide income. I have not claimed benefits for the tax year under an income tax treaty as a nonresident alien."

A nonresident alien is an individual who is not a citizen or resident of the United States. If you are a nonresident alien, the rules discussed in this publication do not apply to you. Instead, 85% of your benefits are taxed at a 30% rate, unless exempt (or subject to a lower rate) by treaty. You will receive a Form SSA-1042S or Form RRB-1042S showing the amount of your benefits. These forms will also show the tax rate and the amount of tax withheld from your benefits.

Under tax treaties with the following countries, residents of these countries are exempt from U.S. tax on their benefits.

• Canada.
• Egypt.
• Germany.
• Ireland.
• Israel.
• Italy.
• Japan.
• Romania.
• United Kingdom.

Under a treaty with India, benefits paid to individuals who are both residents and nationals of India are exempt from U.S. tax if the benefits are for services performed for the United States, its subdivisions, or local government authorities.

If you are a resident of Switzerland, your total benefit amount will be taxed at a 15% rate.

For more information on whether you are a nonresident alien, see Publication 519, U.S. Tax Guide for Aliens.

If your social security benefits are exempt from tax because you are a resident of one of the treaty countries listed, the SSA will not withhold U.S. tax from your benefits.

If your railroad retirement benefits are exempt from tax because you are a resident of one of the treaty countries listed, you can claim an exemption from withholding by filing Form RRB-1001 with the RRB. Contact the RRB to get this form.

Under income tax treaties with Canada and Germany, social security benefits paid by those countries to U.S. residents are treated for U.S. income tax purposes as if they were paid under the social security legislation of the United States. If you receive social security benefits from Canada or Germany, include them on line 1 of Worksheet 1, shown later.