Finances are a major concern when a family breadwinner passes away. Depending on the circumstances, the surviving spouse and children can receive benefits from the deceased’s Social Security account to support them as income — but are Social Security survivor benefits taxable?
It’s important to know under what circumstances Social Security survivor benefits are taxable to those receiving them. Keep in mind that this is on a federal level, so be sure to check with your state’s tax requirements, too.
Are Survivor Benefits for Children Considered Taxable Income?
In most cases, Social Security survivor benefits for children are not considered taxable income. The reason for this is the vast majority of children have no income, so there is nothing to tax. While Social Security checks may be deposited into the surviving parent’s or guardian’s bank account, it still would not count as income for the child.
Are Spousal Survivor Benefits Taxable Income?
Survivor benefits are reported to the IRS under the survivor’s Social Security Number, rather than the deceased spouse’s number. A surviving spouse can receive a survivor benefit amount based on the earnings record of their deceased spouse.
Whether a surviving spouse can collect and how much they can collect depends on the total household income for the year. In most cases, surviving spouses will have to pay taxes on some portion of their income.
To learn if Social Security benefits are taxable, simply add your adjusted gross income for the year to any nontaxable benefits earned, plus half the Social Security benefits. If the total income is $25,000 or more, the income is taxable at 50%. If the total income is $34,000 or more, the income is taxable at 85%. If you are using a tax software program to figure out your taxes, the amount should be automatically calculated.
Are Survivor Benefits Considered Household Income?
Survivor benefits are considered household income in all situations. Whether or not that income is taxable depends on how much additional income the survivor earns. If a survivor chooses to invest their benefits and makes a profit, the earnings are taxable.
For children, the IRS considers the child’s total income including survivor benefits. For surviving spouses, the IRS considers their income alone (not inclusive of any survivor benefits the children are receiving).
Are VA Survivor Benefits Taxable?
Eligible surviving spouses or dependent children of Veterans that died from a service-related cause can receive the Dependency and Indemnity Compensation (DIC). DIC payments are exempt from Federal and state income tax, giving the surviving spouse more income to take home.
DIC is separate from the Survivor Benefit Plan (SBP), which is taxable and provided by the Department of Defense, not the VA. As of January 1, 2022, an amount equal to 1/3 of the spouse’s DIC payment is deducted from any SBP gross annuity amount Beginning January 1, 2023, this offset will no longer exist. DIC payments to or for children do not affect SBP payments. Learn more about military compensation benefits here.
Can I Receive Social Security Survivor Benefits and Still Work?
Anyone at any age can work and receive Social Security survivor benefits, but there are a few things you should know.
If you choose to work and receive Social Security benefits at the same time and you are younger than the full age of retirement, your benefits may be reduced if you earn over a certain amount. If you are over the full retirement age, there is no limit on how much you can earn and still receive your benefits.
For people born before 1955, the retirement age is 66. The age for full retirement increases for those born between 1955 and 1959 to age 67. Anyone born in 1960 or later can fully retire at age 67.
AAFMAA Can Help
AAFMAA’s life insurance policies are designed exclusively for the military community. We’re dedicated to providing the most affordable solution without sacrificing quality or personal service.
If you’re interested in AAFMAA life insurance, request a free quote or call us at 877-398-2263 to consult with an expert who can walk you through your options and answer any questions you have. We look forward to welcoming you to AAFMAA.