Retirement Social Security

How to Pay Less Tax on Your Social Security in Retirement

Retirees need to understand how their Social Security income could be affected in 2026.

By Adam Palasciano , Edited by Laura Hohenstein

Updated Aug. 20, 2026

Add Us On Google

For most retirees, Social Security isn't just a supplement. It's a cornerstone of monthly income. That makes tax changes more than a minor inconvenience; they can meaningfully shift how far your benefits actually stretch.

With 2026 well underway, there's no better time to get clear on how your Social Security could be taxed and what you can do about it. The right planning moves could help you reduce your tax liability, protect more of your income, and make the most of your senior benefits. Even a modest reduction in taxable income can change how much of your Social Security ends up in the government's hands. Here's what retirees need to know heading into the rest of the year.

Get a protection plan on all your appliances

Did you know if your air conditioner stops working, your homeowner’s insurance won’t cover it? Same with plumbing, electrical issues, appliances, and more.

A home warranty from Choice Home Warranty could pick up the slack where insurance falls short.

For a limited time, you can get your first month free with a Single Payment home warranty plan.

Get a free quote

How Social Security benefits are taxed

Social Security benefits are not always fully tax-free. It depends on your other income. The IRS uses a formula that calculates your combined income, which includes your adjusted gross income (AGI), nontaxable interest, and half of your annual Social Security benefits.

The higher your combined income, the more likely it is that a portion of your benefits will be taxed. Currently, up to 85% of your Social Security income can be taxed at the federal level if you exceed specific IRS thresholds.

Shopping for cheaper auto insurance? Enter your zip code here to get started.

IRS Social Security tax thresholds explained

The IRS determines whether your benefits are taxable based on your filing status and combined income. Retirees may be surprised to learn that their benefits are taxable at all.

Below is an easy-to-read version of the federal rules, so you can get a better understanding of how Social Security taxation works:

For single filers, heads of household, or qualifying widow(er)s:

Combined income $25,000 or less → Social Security benefits are not taxed.
Combined income $25,000 to $34,000 → Up to 50% of benefits may be taxable.
Combined income above $34,000 → Up to 85% of benefits may be taxable.

For married couples filing jointly:

Combined income $32,000 or less → Benefits are not taxed.
Combined income $32,000 to $44,000 → Up to 50% of benefits may be taxable.
Combined income above $44,000 → Up to 85% may be taxable.

Some states may tax Social Security benefits

While federal rules determine whether your benefits are taxed nationally, each state can decide whether to tax Social Security income at the state level. Most states do not tax Social Security at all, but a handful still do: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont.

Understanding your state's rules matters because state taxes can reduce your retirement income, even if you owe little to no federal taxes. Always review your state's tax code carefully or speak with a tax professional before filing.

If you’re over 50, take advantage of massive discounts and financial resources

Over 50? Join AARP today— because if you’re not a member you could be missing out on huge perks. When you start your membership today, you can get discounts on things like travel, meal deliveries, eyeglasses, prescriptions that aren’t covered by insurance and more.

Start your membership by creating an account here and filling in all of the information (Do not skip this step!) Doing so will allow you to take up to 25% off your AARP membership, making it just $15 the first year with auto-renewal.

Why the Social Security tax thresholds matter

Because the IRS income thresholds have not been adjusted for inflation recently, more retirees could be hitting taxable ranges each year. Rising wages, increased retirement account withdrawals, and growing investment income can push combined income higher.

Once you cross a threshold, the percentage of your benefits subject to tax can jump significantly. It's crucial to track your income totals throughout the year, especially for retirees with additional taxable income, to avoid money mistakes.

Steps to take to keep more of your Social Security benefits

Retirees can take proactive steps to reduce how much of their Social Security is taxed. Managing your combined income, especially IRA withdrawals and part-time earnings, for example, may help keep you below key IRS thresholds. You can also structure retirement income sources strategically to minimize taxable income.

Move to a state that doesn't tax Social Security benefits

Relocating may make a sizable difference in your retirement budget since the majority of states exempt Social Security from income taxes. Moving to a tax-friendly state may help you preserve more of your federal and state income.

Beyond Social Security, some states may have more favorable tax treatment for retirement income overall. Before making a decision, compare expenses such as cost-of-living differences, health care access, and property taxes to ensure the move makes financial sense.

Retirement News: Almost 80% of Americans fear a retirement age increase — here’s the real reason why

Don't earn more than the IRS limits

Keeping your combined income within federal thresholds helps minimize the taxable portion of your benefits. This may involve reducing part-time work hours, strategically coordinating withdrawals from retirement accounts, or spacing out investment income.

Managing required minimum distributions (RMDs) is also important, as larger withdrawals could unintentionally push you into the 85% bracket. A financial planner can help you build a withdrawal strategy that aligns with your retirement income needs.

Bottom line

Understanding how Social Security taxation works can help you protect more of your retirement income. Reviewing both federal and state rules allows you to make smarter decisions about where you choose to live and how you structure your income throughout your golden years.

By planning ahead and keeping your income within key IRS thresholds, you can build a retirement plan that helps maximize your Social Security and maintain long-term financial stability.

FAQs

How can I reduce taxes on my Social Security benefits?

Managing your combined income may help reduce the portion of your Social Security benefits subject to federal tax. Strategies can include carefully timing retirement account withdrawals, managing part-time earnings and investment income, and planning required minimum distributions. Because tax situations vary, consider consulting a tax professional or financial advisor before making significant changes.

Do retirement account withdrawals affect Social Security taxes?

They can. Taxable withdrawals from traditional IRAs and many employer-sponsored retirement accounts generally increase your adjusted gross income, which can increase your combined income for Social Security tax purposes. A large withdrawal or required minimum distribution could therefore cause more of your benefits to become taxable.

Which states tax Social Security benefits in 2026?

Eight states may tax Social Security benefits in 2026: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont. Rules, exemptions, and income limits vary by state, so retirees should review the requirements where they live.

More from FinanceBuzz: