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I’ve yet to meet anyone who gets excited about filing their taxes, but for most it’s a dull afternoon and then they get a refund deposited to their bank account. That’s not the case for many seniors, though. There’s usually no tax withholding on their retirement account withdrawals, so many actually owe the IRS money at tax time.
This gets even more complicated because it’s not just income from a job and tax-deferred retirement account withdrawals they have to worry about owing. The federal government can also tax up to 85% of their Social Security benefits if their income exceeds the thresholds for their marital status.
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How Social Security benefit taxation works
Social Security benefits weren’t always subject to taxes. Back when the program was struggling in the late 1970s and early 1980s, the government created these taxes as a way to increase funding for the program and avoid insolvency. It added another tier of benefit taxes in the early 1990s.
Since then, the rules for Social Security benefit taxation have remained the same. The IRS looks at your marital status and your provisional income — your adjusted gross income (AGI), plus any nontaxable interest you might have if you own municipal bonds, and half your annual Social Security benefit. The table below shows the tax brackets as they currently stand:
|
Marital Status |
0% of Benefits Taxable If Provisional Income Is Under: |
Up to 50% of Benefits Taxable If Provisional Income Is Between: |
Up to 85% of Benefits Taxable If Provisional Income Exceeds: |
|---|---|---|---|
|
Single |
$25,000 |
$25,000 and $34,000 |
$34,000 |
|
Married |
$32,000 |
$32,000 and $44,000 |
$44,000 |
Source: Social Security Administration.
This doesn’t mean that the IRS will take up to 85% of your benefits, though. The bracket you fall into determines what percentage of your benefits will be subject to ordinary income tax. So, for example, if you’re in the 22% income tax bracket you’d pay 22% tax on up to 85% of your benefits. But that can still be quite a blow to seniors.
These taxes are becoming increasingly common because the values in the table above aren’t indexed for inflation. As average incomes and benefits continue to rise, more and more retirees find themselves in the taxable range. Right now, there aren’t any plans to adjust these taxation thresholds to account for the increase in average benefits either.
What seniors can do
President Donald Trump has stated that he’d like to eliminate Social Security benefit taxes, but doing so will require an act of Congress. So far, there hasn’t been any movement on this issue. Even if there is, it won’t help those who owe these benefits now.
You may not be able to do much about these taxes for the 2024 tax year. If you owe money you cannot afford to pay in a lump sum, you can contact the IRS about setting up a payment plan. Don’t try to avoid these taxes. If you do, the IRS will garnish your checks directly instead.
For 2025 and future years, you may be able to reduce the Social Security benefit taxes you owe by limiting your taxable retirement withdrawals. Keep an eye on where you are in your tax bracket and consider relying more upon Roth savings as you near the top of it. You pay taxes on Roth contributions when you make them, so these retirement withdrawals are tax-free.
You can also request that the IRS withhold money for taxes from your Social Security checks up front. This would save you the trouble of having to do the math to figure out how much you might owe. If it withholds too much from your checks, you’d get the extra back as a refund when you file your tax return.
If you have questions about how Social Security benefit taxes could affect you, consult with a tax professional who can give you advice about your current situation. They can also advise you about any state Social Security benefit taxes you may owe if you live in one of the nine states that still has these taxes.
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