Most Americans who receive Social Security benefits pay income tax on 50% to 85% of that money because their combined income from Social Secur💝ity and other sources pushes ꧒them above the thresholds for taxes to kick in.

Three strategies can help you limit the amount of tax you pay on Social Security benefits: Place some retirement income in a 澳洲幸运5官方开奖结果体彩网:Ro꧙th individual retirement account 𓃲(Roth IRA), withdraw taxable income before retiring, or pu🍃rchase an annuity.

How Much of Your Social𒀰 Security Income Is Taxable?

Social Security payments have been subject to taxation above certain income limits since 1983.

However, no one will pay tax on their full Social Security benefit, and the maximum taxable portion is 85%.

Here’s how the 澳洲幸运5官方开奖结果体彩网:Internal Revenue Service (IRS) calculates what part of your ben🐠efit is taxable:

• 澳洲幸运5官方开奖结果体彩网:Adjusted gross income (AGI): Begin with your AGI, which includes Social Security payments and other income sources like wages, dividends, 澳洲幸运5官方开奖结果体彩网:required𒆙 minimum distrib🌠utions (RMDs) from 澳洲幸运5官方开奖结果体彩网:qualified retirement accounts, and 澳洲幸运5官方开奖结果体彩网:self-employment earnings.
• Tax-exempt interest: Add any nontaxable interest. Even though it isn’t taxable, it still factors into the calculation.
• Combined income: Combine your AGI, nontaxable interest, and half of your Social Security benefits. If this total exceeds the thresholds, part of your Social Security benefits will be 澳洲幸运5官方开奖结果体彩网:taxable income.

The amount you owe depends on precisely where that number lands in the federal income tax tables.

Combined Income = Adjusted Gross Income + Nontaxable Interest + Half of Your Social Security Benefits

The average monthly Social Security retirement benefit is $1,907 as of January 2024. That works out to $22,884 a year.

Taxable Percentage Based on Your Income

The IRS has a that can be used to calculate your total income taxes due if you receive Social Security benefits. Below is a breakdown of the taxable portion of Social Security benefits based on income levels for both individuals and married couples.

Example for an Individual

Say you’re an individual taxpayer who received about $18,000 from the 澳洲幸运5官方开奖结果体彩网:Social Securit🍬y Administration (SSA) last year. You also had $20,000 in other income. Add the two together and you have a gross income of about $38,000. Your combined income is computed as only $29,000, however: other income plus half of your Social Security benefits. That’s within the $25,000 to $34,000 range for a tax of 50% of your benefits.

Example for a Married Couple

Say you’re a semi-retired couple filing jointly and have a combined Social Security benefit oᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚf $26,000. You also had $30,000 in other income. Add the two together and you have a com𓆉bined gross income of $56,000.

Your combined income for Social Security is $43,000: your other income plus half your Social Security benefits. This combined income falls in the $32,000 to $44,000 range, so half the difference between the income and the threshold i🐭s computed at 50% to get your amount taxable.

Social Security Benefits Tax Tool

These straightforward examples may not apply to you. The IRS’s Interactive Tax Assistant (ITA) will lead you through the possible complications and calculate what part of your income is taxable. describes the tax rules for benefits.

Are Spousal, Survivor, 😼Disability, and SSI Benefits🐻 Taxable?

These programs follow the same general rules as the Social Security program for retirees except for 澳洲幸运5官方开奖结果体彩网:Supplemental Security Income (SSI).

Paying Taxes on Social Security

You should receive Form SSA-1099, the Social Security Benefit Statement, each January detailing your benefits during the previous tax year. You can use it to determine whether you owe federal income tax on your benefits. The information is available online if you 🉐enroll on the Social Security website.

State Taxes on Social Security

Nine states tax Social Security benefits in some cases. Check with your if you live in Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, or West Virginia. As with the federal tax, how these agencies tax Social Security varies by income and other criteria.

3 Ways to Reduce Taxes on S🌄ocial Security Benefits

The simplest way to keep your 澳洲幸运5官方开奖结果体彩网:Social Security be✤nefits free from income tax is to keep your total combined income below the thresholds to pay tax. This may not be a🐼 realistic goal for everyone, however. You have three other options to limit the taxes that you owe:

• Place retirement income in Roth accounts
• Withdraw taxable income before retiring
• Purchase an annuity

Place Some Retirement Income in Roth Accounts

Contributions to a Roth IRA or 澳洲幸运5官方开奖结果体彩网:Roth 401(k) are made with after-tax dollars, and withdrawals from these accounts are tax free if taken after age 59½ and the account has been open for at least five years. These Roth 澳洲幸运5官方开奖结果体彩网:distributions won’t count toward your taxable income and won’t increase the taxes on your Social Security benefits.

Distributions taken from a 澳洲幸运5官方开奖结果体彩网:traditional IRA or 澳洲幸运5官方开奖结果体彩网:traditional 401(k) plan are taxable, however.

The Roth advantage makes it wise to consider a mix of regular and Roth retirement accounts well before retirement age. The blend will give you greater flexibility to manage the withdrawals from each account and minimize the taxes you’ll owe on your Social Security benefits. A similar effect can be achieved by managing your withdrawals from conventional savings, 澳洲幸运5官方开奖结果体彩网:money market accounts, or 澳洲幸运5官方开奖结果体彩网:tax-sheltered accounts.

Withdraw Taxable Income Before Retirement

Consider withdrawing funds f♑rom retirement accounts before you begin receiving Social Security. If you make these withdrawals while you’re still wo💞rking, they can reduce your taxable income during retirement, potentially lowering the taxes on your Social Security benefits later.

You can take penalty-free distributions after age 59½. You’ll avoid being dinged for making these withdrawals too early, but you must still pay income tax on the amount you withdraw from traditional rather than Roth accounts.

The withdrawals are taxable unless they’re from a Roth account, so they must be planned carefully with an eye on other taxes you’ll pay that year. The goal is to pay less tax by making more withdrawals during this pre-Social Security ♏period than you would after you begin to draw benefits. This requires considering the total tax bite from withdrawals, Social Security benefits, and other sources.

Be mindful, too, that you’re required to take RMDs from your 401(k), traditional IRA, and certain other retirement accounts. You must begin taking distributions beginning in the year you turn 73 if you reach age 72 after Dec. 31, 2023.

This strategy has another benefit: You might be able to delay applying for Social Security benefits by using these distributions to boost your income when you’re retired or nearing retirement, and this will increase the size of your payments.

Purchase an Annuity

A qualified longevity annuity contract (QLAC) is a 澳洲幸运5官方开奖结果体彩网:deferred annuity that’s funded with an investment from a 澳洲幸运5官方开奖结果体彩网:qualified retirement plan or an IRA. QLACs provide monthly payments for life and are shielded from stock market downturns. They’re exempt from the RMD rules until payouts begin after the specified annuity starting date as long as the annuity complies with IRS requirements.

QLACs can help minimize the tax bite taken from your Social Security benefits by limiting distributions and thus your taxable income during retirement. There was a rule that an individual could spend 25% or $135,000 (whichever is less) of a retirement savings account or an IRA to buy a QLAC with a single premium, but that rule was repealed as of March 2024.

A QLAC shouldn’t be bought only to minimize taxes on Social Security benefits. Retirement annuities have advantages and disadvantages that should be weighed carefu♈lly, preferably with help from a retirement advisor.

The Bottom Line

Most advice on Social Security benefits focuses on 澳洲幸运5官方开奖结果体彩网:when you should start taking ben🙈efits. The short answer is to wait until age 70 if yo🌠u can, to maximize the amount of benefits you receive.

Social Security benefits are taxable based on your total income, not your age. The taxable percentage ranges from 0% to 85%, depending on your combined income. To minimiz♏e your taxes, you should consider strategies such as contributing to Roth accounts, managing your taxable income, and possibly purchasing annuities. Consult with a fi✱nancial planner to develop a strategy that aligns with your retirement goals.