2025 Social Security & Tax Impact Guide: How Guaranteed Annuity Income Affects Your SSA Benefits

Jul 14

🧓 Real-Life Scenario: Married Couple with Annuity Income

Let’s explore the tax impact of guaranteed annuity income on Social Security benefits through a common retirement example.

Couple Profile:

Age: Both are 72 years old
Wife’s Social Security: $1,500/month → $18,000/year
Husband’s Social Security: $800/month → $9,600/year
Total SSA Benefits: $27,600/year
Annuity Income: $20,000/year
Other Income Sources: None

📊 Understanding Provisional Income

Provisional income is the IRS formula used to determine if and how much of your Social Security is taxable. It includes:

Adjusted Gross Income (AGI)
Non-taxable interest
50% of your total Social Security benefits

In this case:

Annuity income = $20,000
50% of SSA benefits = $13,800
Total Provisional Income = $33,800

💰 2025 Social Security Tax Brackets (Married Filing Jointly)

Combined Income% of SSA Benefits That May Be Taxed$0 – $31,9990%$32,000 – $43,999Up to 50%$44,000+Up to 85%

Since this couple’s $33,800 provisional income falls within the 50% tax bracket, up to $13,800 of their Social Security benefits may be taxable.

🔎 Tax Outcome for This Couple

Up to 50% of their Social Security benefits ($13,800) could be taxed.
The $20,000 annuity income directly triggers this taxation, as it contributes to the couple’s provisional income.
All annuity payments are counted, regardless of whether they are from qualified or non-qualified sources.

📥 How Annuity Income is Taxed

Qualified Annuity (e.g., IRA or 401(k) rollover):

Entire payment is 100% taxable as ordinary income.

Non-Qualified Annuity (funded with after-tax money):

Only the earnings (gain) portion is taxable.
Exclusion ratios may allow part of the income to be tax-free.

Key Point: No matter the source, annuity income always counts toward provisional income and may affect your Social Security taxation.

🛡️ Planning Takeaway

Even if you have no earned income, retirement income like annuities can impact your taxes. Understanding the tax treatment of your retirement income streams—and how they affect each other—is critical.

At Medicare & Money, we help retirees optimize their income sources and protect their benefits. If you’re nearing retirement or managing your income in retirement, now’s the time to assess your provisional income and get guidance.

📞 Ready to Make Smart Retirement Moves?

Let’s review your Social Security and retirement income together. Book a free consultation and gain clarity about your financial future.

👉 www.medicareandmoney.com | Empowering Retirement

Lucia Halili