SSA-1099 Non-Taxable Payments: Medicare, Lump Sums, and Errors

Several amounts on your SSA-1099 are excluded from tax. The form itself flags a category called SSA-1099 non-taxable payments in the Box 3 description area, which covers the $255 lump-sum death payment, refunds of excess Medicare premiums, workers’ compensation offset amounts, benefits attributed to months before December 1983, and attorney fees paid directly from your benefits. Benefits you paid back to the Social Security Administration during the year (Box 4) are also excluded. And once those subtractions produce the Box 5 net figure, federal income thresholds decide how much of that remainder is taxable, with anywhere from 0 to 85 percent taxable depending on your combined income and filing status.¹

What the Form Marks as Non-Taxable

Look below the numbered boxes on your SSA-1099 for the “Description of Amount in Box 3” section. That is where SSA breaks the gross benefit figure into components and lists certain items as non-taxable subtractions from the Box 3 total before it flows into Box 5.²

Lump-sum death payment. The one-time $255 payment to a surviving spouse or eligible child. When it appears on your SSA-1099, it is subtracted as non-taxable.
Refunds of excess Medicare premiums. If SSA withheld more than it should have for Medicare, the refunded amount is classified as non-taxable.
Workers’ compensation offset amounts. If your Social Security was reduced because you also received workers’ compensation, the offset amount is included in Box 3 but treated as non-taxable, since the workers’ compensation payer does not report those payments as taxable income.³
Benefits for months before December 1983. Rare now, but any retroactive payments attributed to months before the taxability rules took effect are non-taxable.
Attorney fees. Fees paid directly out of your benefits to a representative are subtracted as non-taxable.²

Repayments in Box 4 work on a separate track. They reduce your net benefits in Box 5 dollar for dollar. If you paid back an overpayment during the year, that full repayment is excluded from the figure used to calculate your tax.⁴ The number that matters after all of this is Box 5, not Box 3.

Medicare Premiums Are Not Among the Non-Taxable Items

This one confuses people every year. Your monthly check arrives after Medicare Part B (and sometimes Part C or Part D) premiums are pulled out. In 2026, the standard Part B premium alone is $202.90 per month.⁵ So you might see $1,500 land in your account each month while Box 3 works out to over $1,700 per month.

Box 3 is the gross figure before Medicare deductions. SSA’s position is that the money was yours and SSA simply forwarded it to Medicare on your behalf. The Medicare premium amount is shown as a descriptive line item in the Box 3 breakdown, but it is not subtracted as non-taxable.² Those premiums flow through into Box 5 net benefits and into the taxability calculation. You may be able to deduct them as a medical expense if you itemize on Schedule A, but they do not come off the top as non-taxable payments.

How Much of What Remains Is Actually Tax-Free

Even after the Box 3 subtractions and Box 4 repayments are stripped out, a portion of your remaining Box 5 net benefits is still tax-free. The IRS uses “combined income” — your adjusted gross income, plus any tax-exempt interest, plus half of your Box 5 net benefits — and compares it to statutory thresholds.⁶ Those thresholds were set by statute and are not adjusted for inflation.¹

Single, Head of Household, or Qualifying Surviving Spouse

Combined income below $25,000: none of your benefits are taxable.
Combined income between $25,000 and $34,000: up to 50 percent may be taxable.
Combined income above $34,000: up to 85 percent may be taxable.

Married Filing Jointly

Combined income below $32,000: none of your benefits are taxable.
Combined income between $32,000 and $44,000: up to 50 percent may be taxable.
Combined income above $44,000: up to 85 percent may be taxable.⁶

Married Filing Separately

If you lived with your spouse at any point during the year, your base amount is zero, which means up to 85 percent of your benefits are subject to tax regardless of income. If you lived apart from your spouse for the entire year, the $25,000 base amount applies instead.¹

Read “up to 85 percent” literally. It is a ceiling, not a set rate. The actual taxable amount comes out of the worksheet in IRS Publication 915, and for most people above the top threshold it lands somewhere between 50 and 85 percent of benefits.⁷ The rest is tax-free.

Retroactive Lump-Sum Payments

A lump-sum payment for prior-year benefits — often paid after a long disability determination — shows up in full on the SSA-1099 for the year you receive it. That can bump your combined income high enough to pull more of your benefits into the taxable bucket than would have happened if the money had arrived on schedule.

The lump-sum election lets you recalculate the taxable portion by attributing the back payment to the earlier year it was meant for, using that year’s income figures. If that produces a lower taxable amount, you can elect to use it. The result is reported on your current-year return; you do not amend the earlier year. The election requires completing Worksheets 2 through 4 in Publication 915 and comparing them against the standard Worksheet 1 calculation. If the election wins, check the box on Form 1040, line 6c. Once made, the election can only be revoked with IRS consent, so run the numbers both ways first.⁷

Payments That Never Appear on the SSA-1099 at All

Supplemental Security Income is not taxable and does not generate an SSA-1099. If SSI is the only payment you get from Social Security, no tax form comes from SSA.⁸ If you receive both regular Social Security and SSI, only the Social Security portion appears on the SSA-1099; the SSI portion is excluded entirely.⁹

Nonresident aliens receive Form SSA-1042S instead of SSA-1099. The treatment is different: SSA withholds a flat 30 percent tax on 85 percent of the benefit, or effectively 25.5 percent of each payment, regardless of other income. A tax treaty between the U.S. and your home country may reduce or eliminate that withholding.¹⁰

If the Non-Taxable Items on Your Form Look Wrong

Start with what Box 3 includes. Because Medicare premiums are folded into the gross figure, Box 3 will exceed what actually landed in your account, and that mismatch is not an error. Sometimes internal adjustments also inflate both Box 3 and Box 4, but they cancel out and Box 5 stays correct.⁴ If the Box 5 net benefits figure itself is wrong, or a non-taxable item you know applies (a workers’ comp offset, an attorney fee, a repayment) is missing from the breakdown, contact SSA and request a corrected form before you file. You can download replacements for the past six years through your my Social Security account at ssa.gov, or call 1-800-772-1213.¹¹

1
Office of the Law Revision Counsel. 26 USC 86 – Social Security and Tier 1 Railroad Retirement Benefits
2
Social Security Administration. GN 05002.010 – Social Security Benefit Statement – Box 3, Benefits Paid
3
Social Security Administration. Taxation of Benefits When Workers Compensation/Public Disability Benefit (WC/PDB) Offset Is Involved
4
Social Security Administration. GN 05002.014 – Social Security Statement – Box 5, Net Benefits
5
Medicare. 2026 Medicare Costs
6
Internal Revenue Service. Social Security Income
7
Internal Revenue Service. Publication 915, Social Security and Equivalent Railroad Retirement Benefits
8
Social Security Administration. Get Tax Form (1099/1042S)
9
Internal Revenue Service. Regular and Disability Benefits
10
Social Security Administration. Nonresident Alien Tax Screening Tool (Reference) – International Programs
11
Social Security Administration. How Can I Get a Replacement Form SSA-1099/1042S