So, the concept here is "combined income". Combined Income is your adjusted gross income plus nontaxable interest and half of your Social Security benefits for the year.
- If your combined income is under $25,000 (single) or $32,000 (joint filing), there is no tax on your Social Security benefits.
- For combined income between $25,000 and $34,000 (single) or $32,000 and $44,000 (joint filing), up to 50% of benefits can be taxed.
- With combined income above $34,000 (single) or above $44,000 (joint filing), up to 85% of benefits can be taxed.
So the question of how much can be withdrawn from the 403(b) depends upon how much half your Social Security benefits are and then your filing status. For example, let's say your yearly Social Security benefits are $25,000 and you are single. You could distribute $12,499 from the 403(b) and none of your Social Security benefits would be considered income. Since the $12,499 withdrawn from the 403(b) is below the standard deduction of $14,600 for filing as Single, without the additional amount for being 65 and older you would not pay any tax.
All the best,
Marc
Employee Tax Expert
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