Christian BrinkleyLicensed agent, NC Life & Health · Updated October 5, 2026 · 3 min read
This one surprises a lot of people. You paid into Social Security your whole working life, so it feels like it should come back tax free. Sometimes it does. But depending on your other income, part of it can be taxed by the federal government. The good news: there's a clear test, and North Carolina stays out of it.
The test: your combined income
The IRS doesn't look at your Social Security by itself. It looks at what Social Security calls your combined income. That's three things added together:
- Your adjusted gross income (wages, pensions, IRA withdrawals, interest, dividends, and so on)
- Any tax-exempt interest, like interest from municipal bonds
- Half of your Social Security benefits for the year
If that total stays under a certain line, none of your benefits are taxed. Go over it, and part of them can be.
The numbers
For someone filing as single:
- Combined income under $25,000: none of your benefits are taxable.
- Between $25,000 and $34,000: up to 50% of your benefits can be taxable.
- Over $34,000: up to 85% can be taxable.
For a married couple filing jointly:
- Under $32,000: none taxable.
- Between $32,000 and $44,000: up to 50% can be taxable.
- Over $44,000: up to 85% can be taxable.
Two things worth knowing. First, “up to 85% taxable” doesn't mean an 85% tax. It means up to 85% of your benefit gets added to your taxable income, then taxed at your normal rate. Second, these lines were set decades ago and don't go up with inflation. That's why more retirees cross them every year.
If you're married filing separately and lived with your spouse at any point in the year, the rules are stricter, and up to 85% of benefits can generally be taxed.
What North Carolina does
North Carolina doesn't tax Social Security benefits. If part of your benefit shows up in your federal adjusted gross income, the state lets you take it back out on your NC return. Your pension and IRA withdrawals are a different story, so don't assume all retirement income gets the same treatment.
Why your other income matters so much
Since the test adds up everything, a decision about one account can change the tax on another. A big IRA withdrawal, a Roth conversion, or selling investments at a gain can all push your combined income over a line. Suddenly more of your Social Security is taxable too.
Higher income can also raise your Medicare premiums two years later through something called IRMAA. I wrote about that in Will Medicare cost me more because of my income?
Paying the tax without a surprise in April
Social Security doesn't hold back federal tax unless you ask. If you expect to owe, you have two options:
- Fill out IRS Form W-4V and give it to Social Security. You can have 7%, 10%, 12%, or 22% of each payment withheld.
- Make quarterly estimated payments to the IRS instead.
Each January, Social Security mails you a Form SSA-1099 showing what you were paid. That's the number you or your tax preparer will use.
One more recent change: for tax years 2025 through 2028, people 65 and older can take an extra federal deduction of up to $6,000 each, which shrinks at higher incomes. It doesn't change the test above, but it can lower the taxable income you end up with. Ask whoever prepares your return how it applies to you.
Questions people ask me about this
Will I ever pay tax on all of my Social Security?
No. Under federal law, the most that can be counted as taxable income is 85% of your benefits, no matter how high your other income is.
Are my Medicare premiums part of this?
Your Part B premium is usually taken out of your Social Security check, but the full benefit before premiums is what counts for this test. Your SSA-1099 shows both numbers.
Does North Carolina tax my IRA withdrawals?
Generally yes. North Carolina exempts Social Security, but most other retirement income, like traditional IRA and 401(k) withdrawals, is taxed by the state.
Can you do my taxes?
No. I'm an insurance agent and an accounting student working toward my CPA, not a tax preparer. I'm glad to explain how this connects to your Medicare costs, and you should run your actual numbers with a tax professional.