6. Myth: Social Security is tax-free income
Yes, Social Security is tax-free income in most states, but it depends on how much additional, or “provisional” income there is. Provisional income is adjusted Gross Income, minus Social Security, plus 50 percent of benefits and any tax-free income, such as from municipal bonds.
If income per person is less than $25,000, or $32,000 per couple, no taxes are owed. With more than that, up to 85 percent of Social Security benefits can be taxed.