It wasn’t until 1984 that Social Security became taxable. It came at a time when the Social Security trust fund was dangerously close to running dry, and the solution Congress proposed included taxing benefits. And yet, the taxation of Social Security benefits comes as a surprise to many.

If you’re unclear as to how benefits are taxed, you’ll find the answers here. After all, planning for retirement requires knowing how much money will remain after taxes are deducted.

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When Social Security benefits are taxed

Whether your Social Security benefits are subject to taxes depends on what the IRS calls your “combined income.” Combined income includes:

• Your adjusted gross income (AGI)
• Nnontaxable interest
• One-half of your Social Security benefits

Based on this combined income, you may owe federal taxes on up to 85% of your benefits. In other words, if your monthly benefit amount is $1,000, up to $850 of that amount may be taxed by the federal government.

While 42 states don’t tax Social Security, these eight states may tax part of your benefits:

• Colorado
• Connecticut
• Minnesota
• Montana
• New Mexico
• Rhode Island
• Utah
• Vermont

Each state has a different set of parameters and income limits, and if you are taxed, it will be at your state’s rate.

2026 income thresholds for federal taxation

Single/head of household

• Combined income below $25,000: No taxes on benefits.
• Combined income $25,000-$34,000: Up to 50% of benefits may be taxable.
• Combined income above $34,000: Up to 85% of benefits may be taxable.

Married couple filing jointly

• Combined income below $32,000: No taxes on benefits.
• Combined income $32,000-$44,000: Up to 50% of benefits may be taxable.
• Combined income above $44,000: Up to 85% of benefits may be taxable.

Married filing separately

• Living apart: The combined income threshold is the same as that of single filers. Between 0% and 85% may be taxable.
• Lived with your spouse at any time during the year: Up to 85% may be taxable.

Income sources that trigger taxes

Unless you plan carefully, it’s easy to unknowingly end up paying more in taxes in retirement than you intend. Here are some common income sources that can push you into a higher tax rate:

• Tax-deferred accounts like IRAs and 401(k)s: Remember, your combined income includes income from many sources. If you’re withdrawing funds from a tax-deferred retirement account, it adds to your total.
• Pension payments: Like tax-deferred retirement accounts, any money you receive in pension payments is part of your income.
• Part-time work: Whether you’re working to bring in extra money or to keep yourself busy, it’s also included in your income.
• Investment income: Money you earn from investments adds to your income.
• Rental income: Rental payments can also push you over your desired income level.

As you ask yourself how much money you need to retire, make it a point to plan for taxes.

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