Written by Hazel Secco, CFP®, CDFA®
As you approach retirement, one important question often comes up: Do you pay taxes on Social Security benefits?
The answer isn’t always simple — and understanding it can make a meaningful difference in your retirement income and tax strategy.
The way Social Security benefits are taxed depends on how your benefits interact with other sources of income. Factors such as adjusted gross income (AGI), retirement account distributions, and investment income can all influence how much of your Social Security may be subject to tax.
In this guide, we’ll walk through how Social Security benefits are taxed, strategies to reduce their tax impact, and how thoughtful planning can help you keep more of your retirement income.
Table of contents
Understanding How Social Security Benefits Are Taxed
Defining Combined Income
The taxation of Social Security benefits is based on your combined income, which includes:
- Adjusted Gross Income (AGI)
- Tax-exempt interest (such as municipal bond interest)
- 50% of your Social Security benefits
If your combined income exceeds certain thresholds, a portion of your Social Security benefits may become taxable. Understanding how this formula works can help you better manage withdrawals and income sources in retirement.
The Role of the SSA-1099 Form
Each January, the Social Security Administration issues Form SSA-1099, which reports the total benefits you received in the prior year. This form is required to accurately report Social Security income on your tax return.
If you misplace the form, you can access a copy through your online Social Security account.
Income Thresholds and Tax Implications
The federal government applies fixed income thresholds to determine how much of your Social Security benefits may be taxed:
- Single filers:
- Combined income above $25,000 → up to 50% taxable
- Combined income above $34,000 → up to 85% taxable
- Married filing jointly:
- Combined income above $32,000 → up to 50% taxable
- Combined income above $44,000 → up to 85% taxable
These thresholds have not been adjusted for inflation, which means more retirees are affected over time as incomes rise.
Strategies to Minimize Taxes on Social Security Benefits
Utilizing Roth IRAs for Tax-Free Withdrawals
One effective way to reduce the taxation of Social Security benefits is through Roth IRA planning. Qualified Roth IRA withdrawals are tax-free and do not increase combined income, which means they don’t trigger additional taxation of Social Security.
This strategy is often most powerful during the years after retirement but before claiming Social Security, when Roth conversions may help reduce future tax exposure.
Timing Retirement Distributions Strategically
The timing of retirement account withdrawals plays a significant role in your tax picture. Required minimum distributions (RMDs) from traditional IRAs and 401(k)s increase AGI and combined income, which may push more of your Social Security benefits into taxable territory.
Delaying Social Security benefits until age 70 can increase lifetime benefits while creating planning opportunities to manage withdrawals earlier in retirement.
Considering Annuities and Their Impact
A Qualified Longevity Annuity Contract (QLAC) can help defer required minimum distributions and reduce taxable income before annuity payments begin.
Under SECURE Act 2.0, higher contribution limits allow greater flexibility. While QLAC payments are taxable when received, they can help smooth income later in retirement and manage longevity risk.
State Taxation of Social Security Benefits
States That Tax Social Security Benefits
State taxation of Social Security benefits varies widely. A small number of states still tax benefits in some form, though many have recently reduced or eliminated these taxes or offer income-based exemptions.
State rules may depend on income level, filing status, or age, making location an important consideration in retirement planning.
Exemptions and Deductions at the State Level
Several states provide partial or full exemptions through credits or deductions. For example, some states exclude Social Security income below certain AGI thresholds, while others use graduated exemption systems.
Because state laws change frequently, reviewing your state’s current rules is essential.
How to Withhold Taxes From Your Social Security Payments
Federal Tax Withholding Options
You can elect to have federal income taxes withheld directly from your Social Security benefits using IRS Form W-4V. Available withholding rates include 7%, 10%, 12%, or 22%.
This approach can help prevent an unexpected tax bill at year-end.
Estimated Quarterly Tax Payments
If you prefer not to withhold taxes from Social Security payments, you may instead make quarterly estimated tax payments to the IRS. This option allows you to spread your tax obligation throughout the year and avoid underpayment penalties.
Planning for Tax Efficiency in Retirement
The Importance of Early Planning
Proactive tax planning allows you to coordinate income sources, manage withdrawals strategically, and identify opportunities for long-term tax savings. Maintaining organized financial records also helps ensure you don’t miss deductions or credits.
Seeking Professional Guidance
Social Security taxation is deeply interconnected with retirement income planning, investment strategy, and healthcare costs. Working with a Certified Financial Planner™ can help you navigate these decisions with clarity and confidence.
Conclusion
Understanding how Social Security benefits are taxed is a critical part of building a thoughtful retirement plan. By learning how combined income works, using tax-efficient withdrawal strategies, and planning ahead, you can reduce tax surprises and keep more of what you’ve worked so hard to build.
Every retirement plan is personal. The right strategy depends on your income sources, goals, and long-term vision.
At Align Financial Solutions, we help women and families plan intentionally — so they can retire with confidence, clarity, and flexibility.
👉 Schedule a complimentary conversation to explore how Social Security and tax planning fit into your bigger financial picture.
FAQs
1. How are taxes applied to Social Security benefits?
Social Security benefits may be subject to federal income tax depending on your combined income, which is calculated as:
**Adjusted Gross Income (AGI)
- tax-exempt interest
- 50% of your Social Security benefits**
If your combined income exceeds:
- $25,000 for single filers
- $32,000 for married couples filing jointly
then up to 50% or up to 85% of your Social Security benefits may be taxable.
You can choose to pay these taxes when you file your return, or you may elect to have federal taxes withheld directly from your Social Security payments.
These income thresholds are still current and have not been adjusted for inflation.
2. How can I determine how much of my Social Security benefits are taxable?
The taxable portion of your Social Security benefits appears on line 6b of IRS Form 1040 or 1040-SR.
The calculation considers your combined income, including wages, retirement distributions, interest, dividends, and tax-exempt interest. If your combined income exceeds the applicable threshold, a portion of your benefits becomes taxable.
Because this calculation can be complex, many retirees benefit from reviewing this with a financial or tax professional as part of their broader retirement income strategy.
3. Do I need to file a tax return if Social Security is my only income?
In many cases, if Social Security benefits are your only source of income, they are not taxable, and you may not be required to file a federal income tax return.
However, filing requirements can vary based on other factors, such as marital status, prior withholding, or state tax rules. It’s always wise to confirm based on your specific situation.
4. Does Social Security become non-taxable at a certain age?
No. Social Security benefits do not become tax-free at any age. Federal taxation rules apply regardless of whether you are 62, 70, or older.
That said, state taxation of Social Security benefits varies, and many states do not tax Social Security income at all. Understanding both federal and state rules is an important part of retirement planning.
Have questions about Social Security and retirement taxes?
Social Security taxation can significantly impact your retirement cash flow — especially for women who are planning for longevity, healthcare costs, and flexible income.
👉 Schedule a complimentary call to explore how we help women over 45 and their families build lasting wealth, reduce tax surprises, and plan with confidence.
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References
https://www-origin.ssa.gov/benefits/retirement/planner/taxes.html
https://faq.ssa.gov/en-us/Topic/article/KA-02471
https://www.schwab.com/learn/story/social-security-is-taxable-how-to-minimize-taxes
https://faq.ssa.gov/en-us/Topic/article/KA-02471
https://www.ml.com/articles/taxes-and-your-social-security.html
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.