Capital Gains and how they effect how much of my Social Security benefits are taxed.

[JWAmpsOnly]

Do all of my capital gains get added to my "Combined Income" to determine how much of my Social Security benefits are taxed?

[carmen_t]

Hello,

Thank you for your question and an excellent one for tax planning.  Capital gains will add to your total income to determine if and how much you social security benefits will be taxable.  I included a great link to help explain a little more in depth at your convenicene.

From Social Security Website 

From IRS Website 

From TurboTax Website 

[JWAmpsOnly]

Thank you, Carmen.

The links you provided help a lot.

[Katie-P · Accepted solution]

 Hi @JWAmpsOnly!

 Thanks for your question! I'd be happy to give you some guidance.

• If you have a net capital gain for the tax year, then yes, it would need to be included in your total "combined income" for purposes of determining how much of your Social Security benefits are taxed.
• The IRS has a great tool you can use to determine what portion, if any, of your benefits will be taxed. Here's a link to the applicable IRS Interactive Tax Assistant: https://www.irs.gov/help/ita/are-my-social-security-or-railroad-retirement-tier-i-benefits-taxable
• Here is another IRS link where they specifically say that capital gains are included: https://www.irs.gov/newsroom/irs-reminds-taxpayers-their-social-security-benefits-may-be-taxable
• Note that if you have a carryforward capital loss from a prior year, that could impact your net capital gains for the next year. For example:
  • Let's say that you have $15k of net capital losses in 2022, of which $3k you could deduct that tax year.
  • $12k would carry forward.
  • In 2023, you have a net capital gain of $4k.
  • But since you have a carryforward loss, you can completely wipe out that $4k and get to take on an additional loss of $3k.
  • Your carryforward to 2024 is now $5k (but that is really not important to this discussion).
  • For tax year 2023, you wouldn't have any capital gains to report, and instead, a loss of $3k; that could impact how much of your 2023 social security benefits are subject to tax.

I hope this information is helpful, @JWAmpsOnly ! I'll stay tuned in case you have a follow-up question. Thanks again!

[JWAmpsOnly]

Thank you, Katie.

Your thorough answer with an example is ideal.  After running the numbers myself and also using the IRS Interactive Tax Assistant, it appears I will not owe taxes on my Social Security benefits, which of course, is ideal.

[Katie-P]

@JWAmpsOnly , that's awesome! I applaud your tax planning and I'm glad to hear that your Social Security benefits won't be taxed!