For millions of Americans, Social Security benefits are an essential component of their retirement income. The possibility that their benefits could be taxed, however, shocks a lot of retirees. With new rules and growing income levels, more people than ever before may be in debt for Social Security payments.
Discover how Social Security is taxed, what the most recent legislation and inflation imply for retirees, and—above all—how you may be able to lower or avoid these taxes.
Why Do We Tax Social Security Benefits?
It wasn’t until 1984 that Social Security payouts were taxed. Congress enacted legislation that year that permitted the IRS to tax benefits in the event that a retiree’s income surpassed specific thresholds.
The cost of living and average wages have increased, bringing more people into the taxable zone year, even though those income criteria haven’t been updated for inflation in decades.
Even pensioners with modest incomes may have to pay federal taxes on a portion of their pensions in 2025 due to new tax laws and inflationary pressures.
The Operation of Social Security Taxation
Your “combined income” is what the IRS uses to calculate whether your Social Security benefits are taxable. The total income consists of:
- Your AGI, or adjusted gross income
- Interest that is not taxable (like municipal bonds)
- Half of your Social Security income
This indicates how much of your benefits may be subject to taxes:
| Filing Status | Combined Income | Taxable Benefits |
| Individual | $25,000 – $34,000 | Up to 50% of benefits |
| Individual | Over $34,000 | Up to 85% of benefits |
| Married Filing Jointly | $32,000 – $44,000 | Up to 50% of benefits |
| Married Filing Jointly | Over $44,000 | Up to 85% of benefits |
In 2025, what is changing?
Other changes to the tax code, such as larger withdrawals from retirement accounts or bigger pension payouts, may force seniors into higher income categories, making more of their benefits taxable, even though the income levels for Social Security taxation have remained unchanged.
Additionally, as budget requirements rise, several state legislatures are reevaluating whether to impose a state-level tax on Social Security.
Although Social Security is not taxed in many jurisdictions, fresh plans in a few states may change that in the years to come.
Read Also: IRS Issues Urgent Warning: File This Form or Face a Penalty
How to Cut Social Security Taxes or Avoid Them?
You can take actions to reduce the amount of your Social Security that is taxed, even if the federal thresholds are set.
- Control Your Withdrawals in Retirement
To maintain a modest total income, make calculated withdrawals from Roth IRAs, which are not considered taxable income. - Postponement Receiving Social Security
Delaying benefits can help you stay below the tax threshold once you start receiving them by increasing your monthly payments and enabling you to take out other taxable retirement funds first. - Make Use of Tax-Efficient Assets
Steer clear of high amounts of taxable interest income (such as bonds) and investigate exchange-traded funds (ETFs) or mutual funds that are tax-efficient. - Take into account QCDs, or qualified charitable distributions.
You can give up to $100,000 straight from your IRA to charity if you’re older than 70½. This lowers your total income because it is not considered taxable income. - Consult a Tax Professional
A specialist can assist you in creating a plan that is specific to your circumstances, utilizing predictions or tax software to keep you below the important thresholds.
