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IRS.gov Website
Publication 915
taxmap/pubs/p915-004.htm#en_us_publink100097901

Deductions Related to Your Benefits(p15)

rule
You may be entitled to deduct certain amounts related to the benefits you receive.
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Disability payments.(p15)

rule
You may have received disability payments from your employer or an insurance company that you included as income on your tax return in an earlier year. If you received a lump-sum payment from SSA or RRB, and you had to repay the employer or insurance company for the disability payments, you can take an itemized deduction for the part of the payments you included in gross income in the earlier year. If the amount you repay is more than $3,000, you may be able to claim a tax credit instead. Claim the deduction or credit in the same way explained under Repayment of benefits received in an earlier year in the section Repayments More Than Gross Benefits, later.
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Legal expenses.(p15)

rule
You can usually deduct legal expenses that you pay or incur to produce or collect taxable income or in connection with the determination, collection, or refund of any tax.
Legal expenses for collecting the taxable part of your benefits are deductible as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23.
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Repayments More Than Gross Benefits(p15)

rule
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. Do not use Worksheet 1 in this case. 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.
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Joint return.(p15)

rule
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.
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Example.(p15)

John and Mary file a joint return for 2010. John received Form SSA-1099 showing $3,000 in box 5. Mary also received Form SSA-1099 and the amount in box 5 was ($500). John and Mary will use $2,500 ($3,000 minus $500) as the amount of their net benefits when figuring if any of their combined benefits are taxable.
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Repayment of benefits received in an earlier year.(p15)

rule
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.
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Deduction $3,000 or less.(p15)
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.
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Deduction more than $3,000.(p15)
If this deduction is more than $3,000, you should figure your tax two ways:
  1. Figure your tax for 2010 with the itemized deduction included on Schedule A, line 28.
  2. Figure your tax for 2010 in the following steps:
    1. Figure the tax without the itemized deduction included on Schedule A, line 28.
    2. For each year after 1983 for which part of the negative figure represents a repayment of benefits, refigure your taxable benefits as if your total benefits for the year were reduced by that part of the negative figure. Then refigure the tax for that year.
    3. Subtract the total of the refigured tax amounts in (b) from the total of your actual tax amounts.
    4. Subtract the result in (c) from the result in (a).
Compare the tax figured in methods (1) and (2). Your tax for 2010 is the smaller of the two amounts. If method (1) results in less tax, take the itemized deduction on Schedule A (Form 1040), line 28. If method (2) results in less tax, claim a credit for the amount from step 2(c) above on Form 1040, line 71, and write "I.R.C. 1341" in the margin to the left of line 71. If both methods produce the same tax, deduct the repayment on Schedule A (Form 1040), line 28.
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Worksheet 1.Figuring Your Taxable Benefits 
  Keep for your records
Before you begin:
  • If you are married filing separately and you lived apart from your spouse for all of 2010, enter "D" to the right of the word "benefits" on Form 1040, line 20a, or Form 1040A, line 14a.
  • Do not use this worksheet if you repaid benefits in 2010 and your total repayments (box 4 of Forms SSA-1099 and RRB-1099) were more than your gross benefits for 2010 (box 3 of Forms SSA-1099 and RRB-1099). None of your benefits are taxable for 2010. For more information, see Repayments More Than Gross Benefits.
  • If you are filing Form 8815, Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989, do not include the amount from line 8a of Form 1040 or Form 1040A on line 3 of this worksheet. Instead, include the amount from Schedule B (Form 1040A or 1040), line 2.
 1.Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099. Also enter this amount on Form 1040, line 20a, or Form 1040A, line 14a  1.    
 2.Enter one-half of line 1 2. 
 3.Combine the amounts from:
Form 1040: Lines 7, 8a, 9a, 10 through 14, 15b, 16b, 17 through 19, and 21
Form 1040A: Lines 7, 8a, 9a, 10, 11b, 12b, and 13
 3. 
 4.Enter the amount, if any, from Form 1040 or 1040A, line 8b 4. 
 5.Enter the total of any exclusions/adjustments for:
  • Adoption benefits (Form 8839, line 26),
  • Foreign earned income or housing (Form 2555, lines 45 and 50, or Form 2555-EZ, line 18), and
  • Certain income of bona fide residents of American Samoa (Form 4563, line 15) or Puerto Rico
 5. 
 6.Combine lines 2, 3, 4, and 5 6. 
 7.Form 1040 filers: Enter the amounts from Form 1040, lines 23 through 32, and any write-in adjustments you entered on the dotted line next to line 36.
Form 1040A filers: Enter the amounts from Form 1040A, lines 16 and 17
 7. 
 8.Is the amount on line 7 less than the amount on line 6?    
  No. stop None of your social security benefits are taxable. Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b.    
  Yes. Subtract line 7 from line 6 8. 
 9.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
 9. 
 Note. If you are married filing separately and you lived with your spouse at any time in 2010, skip lines 9 through 16; multiply line 8 by 85% (.85) and enter the result on line 17. Then go to line 18.     
10.Is the amount on line 9 less than the amount on line 8?    
  No. stop None of your benefits are taxable. Enter -0- on Form 1040, line 20b, or on Form 1040A, line 14b. If you are married filing separately and you lived apart from your spouse for all of 2010, be sure you entered "D" to the right of the word "benefits" on Form 1040, line 20a, or on Form 1040A, line 14a.     
  Yes. Subtract line 9 from line 810. 
11.Enter $12,000 if married filing jointly; $9,000 if single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2010 11. 
12.Subtract line 11 from line 10. If zero or less, enter -0-12. 
13.Enter the smaller of line 10 or line 11 13. 
14.Enter one-half of line 1314. 
15.Enter the smaller of line 2 or line 14 15. 
16.Multiply line 12 by 85% (.85). If line 12 is zero, enter -0-16. 
17.Add lines 15 and 1617. 
18.Multiply line 1 by 85% (.85)18. 
19.Taxable benefits. Enter the smaller of line 17 or line 18. Also enter this amount on Form 1040, line 20b, or Form 1040A, line 14b 19. 
 
taxtip

If you received a lump-sum payment in 2010 that was for an earlier year, also complete Worksheet 2 or 3 and Worksheet 4 to see if you can report a lower taxable benefit.
    
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Worksheet 2.Figure Your Additional Taxable Benefits (From a Lump-Sum Payment for a Year After 1993)
Enter earlier year               
 Keep for your records
 1.Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099 for the earlier year, plus the lump-sum payment for the earlier year received after that year  1.    
 Note. If line 1 is zero or less, skip lines 2 through 20 and enter -0- on line 21. Otherwise, go on to line 2.       
 2.Enter one-half of line 1 2. 
 3.Enter your adjusted gross income for the earlier year 3. 
 4.Enter the total of any exclusions/adjustments you claimed in the earlier year for:
  • Adoption benefits (Form 8839)
  • Qualified U.S. savings bond interest (Form 8815)
  • Student loan interest (Form 1040, page 1, or Form 1040A, page 1)
  • Tuition and fees (Form 1040, page 1, or Form 1040A, page 1)
  • Domestic production activities (for 2005 through 2009) (Form 1040, page 1)
  • Foreign earned income or housing (Form 2555 or Form 2555-EZ)
  • Certain income of bona fide residents of American Samoa (Form 4563) or Puerto Rico
 4. 
 5.Enter any tax-exempt interest received in the earlier year 5. 
 6.Add lines 2 through 5 6. 
 7.Enter your taxable benefits for the earlier year that you previously reported 7. 
 8.Subtract line 7 from line 6 8. 
 9.If, for the earlier year, you were: 
 
  • Married filing jointly, enter $32,000
  • Single, head of household, qualifying widow(er), married filing separately and you lived apart from your spouse for all of the earlier year, enter $25,000
 9. 
 Note. If you were married filing separately and you lived with your spouse at any time during the earlier year, skip lines 9 through 16; multiply line 8 by 85% (.85) and enter the result on line 17. Then go to line 18.     
10.Is the amount on line 8 more than the amount on line 9?  
   No.  Skip lines 10 through 20 and enter -0- on line 21.   
   Yes. Subtract line 9 from line 8 10. 
11.Enter $12,000 if married filing jointly for the earlier year; $9,000 if single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of the earlier year 11. 
12.Subtract line 11 from line 10. If zero or less, enter -0-12. 
13.Enter the smaller of line 10 or line 11 13. 
14.Enter one-half of line 1314. 
15.Enter the smaller of line 2 or line 14 15. 
16.Multiply line 12 by 85% (.85). If line 12 is zero, enter -0-16. 
17.Add lines 15 and 1617. 
18.Multiply line 1 by 85% (.85)18. 
19.Refigured taxable benefits. Enter the smaller of line 17 or line 18 19. 
20.Enter your taxable benefits for the earlier year (or as refigured due to a previous lump-sum payment for the year)20. 
21.Additional taxable benefits. Subtract line 20 from line 19. Also enter this amount on Worksheet 4, line 20 21. 
  caution Do not file an amended return for this earlier year. Complete a separate Worksheet 2 or Worksheet 3 for each earlier year for which you received a lump-sum payment in 2010. 
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Worksheet 3.Figure Your Additional Taxable Benefits (From a Lump-Sum Payment for a Year Before 1994)
Enter earlier year               
 Keep for your records
 1.Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099 for the earlier year, plus the lump-sum payment for the earlier year received after that year  1.   
 Note. If line 1 is zero or less, skip lines 2 through 13 and enter -0- on line 14. Otherwise, go on to line 2.      
 2.Enter one-half of line 1 2. 
 3.Enter your adjusted gross income for the earlier year 3. 
 4.Enter the total of any exclusions/adjustments you claimed in the earlier year for:
  • Qualified U.S. savings bond interest (Form 8815)
  • Foreign earned income or housing (Form 2555 or Form 2555-EZ)
  • Certain income of bona fide residents of American Samoa (Form 4563) or Puerto Rico
 4. 
 5.Enter any tax-exempt interest received in the earlier year 5. 
 6.Add lines 2 through 5 6. 
 7.Enter your taxable benefits for the earlier year that you previously reported 7. 
 8.Subtract line 7 from line 6 8. 
 9.Enter $25,000 ($32,000 if married filing jointly for the earlier year; $0 if married filing separately for the earlier year and you lived with your spouse at any time during the earlier year)  9. 
10.Is the amount on line 8 more than the amount on line 9?
  No.  Skip lines 10 through 13 and enter -0- on line 14.
  Yes. Subtract line 9 from line 8.
10. 
11.Enter one-half of line 1011. 
12.Refigured taxable benefits. Enter the smaller of line 2 or line 11 12. 
13.Enter your taxable benefits for the earlier year (or as refigured due to a previous lump-sum payment for the year)13. 
14.Additional taxable benefits. Subtract line 13 from line 12. Also enter this amount on Worksheet 4, line 20 14. 
  caution Do not file an amended return for this earlier year. Complete a separate Worksheet 2 or Worksheet 3 for each earlier year for which you received a lump-sum payment in 2010. 
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Worksheet 4.Figure Your Taxable Benefits Under the Lump-Sum Election Method
(Use With Worksheet 2 or 3)
     Keep for your records
Complete Worksheet 1 and Worksheets 2 and 3 as appropriate before completing this worksheet.
 1.Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099 for 2010, minus the lump-sum payment for years before 2010  1.   
 Note. If line 1 is zero or less, skip lines 2 through 18, enter -0- on line 19 and go to line 20. Otherwise, go on to line 2.      
 2.Enter one-half of line 1 2. 
 3.Enter the amount from Worksheet 1, line 3 3. 
 4.Enter the amount from Worksheet 1, line 4 4. 
 5.Enter the amount from Worksheet 1, line 5 5. 
 6.Combine lines 2, 3, 4, and 5 6. 
 7.Enter the amount from Worksheet 1, line 7 7. 
 8.Subtract line 7 from line 6 8. 
 9.Enter the amount from Worksheet 1, line 9. But if you are married filing separately and lived with your spouse at any time during 2010, skip lines 9 through 16; multiply line 8 by 85% (.85) and enter the result on line 17. Then, go to line 18  9. 
10.Is the amount on line 8 more than the amount on line 9?
  No.  Skip lines 10 through 18, enter -0- on line 19, and go to line 20.
  Yes. Subtract line 9 from line 8
10. 
11.Enter the amount from Worksheet 1, line 1111. 
12.Subtract line 11 from line 10. If zero or less, enter -0-12. 
13.Enter the smaller of line 10 or line 11 13. 
14.Enter one-half of line 1314. 
15.Enter the smaller of line 2 or line 14 15. 
16.Multiply line 12 by 85% (.85). If line 12 is zero, enter -0-16. 
17.Add lines 15 and 1617. 
18.Multiply line 1 by 85% (.85)18. 
19.Enter the smaller of line 17 or line 18 19. 
20.Enter the total of the amounts from Worksheet 2, line 21, and Worksheet 3, line 14, for all earlier years for which the lump-sum payment was received 20. 
21.Taxable benefits under lump-sum election method. Add lines 19 and 20 21. 
Next. Is line 21 above smaller than Worksheet 1, line 19?
  No. Do not use this method to figure your taxable benefits. Follow the instructions on Worksheet 1 to report your benefits.
  Yes. You can elect to report your taxable benefits under this method. To elect this method:
  
  1. Enter "LSE" to the left of Form 1040, line 20a, or Form 1040A, line 14a.
  2. If line 21 above is zero, follow the instructions in line 10 for "No" on Worksheet 1. Otherwise:
    1. Enter the amount from Worksheet 1, line 1 on Form 1040, line 20a, or on Form 1040A, line 14a.
    2. Enter the amount from line 21 above on Form 1040, line 20b, or on 1040A, line 14b.
    3. If you are married filing separately and you lived apart from your spouse for all of 2010, enter "D" to the right of the word "benefits" on Form 1040, line 20a, or Form 1040A, line 14a.
 
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