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The basics
The familiar ‘85%’ is the maximum share of benefits included in taxable income—not an 85% tax rate. Other income determines how much of the benefit joins the ordinary-income calculation.
Illustrative numbers
How another dollar can pull benefits into tax
Annual Social Security$30,000
Half used in provisional income$15,000
Other incomeadded before threshold test
As other income moves through the statutory threshold bands, the taxable portion grows, subject to the 50% and 85% caps. The resulting taxable share is then taxed on the ordinary ladder.
Calculation transparency
How it works in MoneyWhatIf
- 01
The model uses the federal provisional-income formula with the statutory single and joint threshold bands.
- 02
After a withdrawal or sale changes income, the tax worksheet is recomputed so the induced change in taxable benefits is included.
- 03
Modeled Social Security is excluded from state taxable income except in the six states that really tax it (MT, and MN/VT/NM/RI/CT under their own income gates), where the state keeps up to the federally taxable share.
Keep in mind
Model limits
The plan does not model every adjustment that can enter the official provisional-income worksheet.
It applies an annual household formula; withholding and month-by-month benefit timing are outside the model.
The state treatment is intentionally simplified and may be conservative or generous for a particular state and household.
This explanation documents the planning model. It is educational, not individualized tax, legal, Medicare, or investment advice.
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The words behind it
Related financial terms
Plain-English definitions, with 2026 figures and worked examples, from the financial terms glossary.