You’ve worked decades. You paid in. Now you’re finally getting those monthly checks from the Social Security Administration, and suddenly, the IRS wants a piece of the action. It feels a bit like being double-taxed, doesn't it? Honestly, it’s one of the most frustrating surprises for new retirees.
Most people assume Social Security is "tax-free" income.
That is a myth.
While the program started out that way back in the 1930s, things changed in 1983 and again in 1993. Nowadays, if you have other sources of income—like a part-time job, a pension, or those 401(k) withdrawals you’re finally tapping into—you might find that a huge chunk of your benefits is actually taxable. We’re talking up to 85%.
But here is the kicker: fed tax on social security doesn't apply to everyone. In fact, about half of all beneficiaries don’t pay a dime in federal income tax on their benefits. The trick is knowing where you land on the IRS "Combined Income" scale.
The Magic Number: How the IRS Decides You Owe
The IRS doesn't just look at your adjusted gross income (AGI). They use a specific, slightly weird formula called "combined income" (some call it provisional income). Basically, they take your AGI, add back any tax-exempt interest (like from municipal bonds), and then add exactly half of your Social Security benefits.
That’s the number that matters.
Let’s look at the actual thresholds for 2026. If you’re filing as an individual and your combined income is under $25,000, you’re in the clear. Zero tax. If you’re married filing jointly, that "safe zone" goes up to $32,000.
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But once you cross those lines? The math gets messy.
For Single Filers (Individual, Head of Household)
- $25,000 to $34,000: You may have to pay income tax on up to 50% of your benefits.
- Over $34,000: Up to 85% of your benefits can be taxable.
For Married Couples Filing Jointly
- $32,000 to $44,000: Up to 50% of your benefits may be taxable.
- Over $44,000: Up to 85% of your benefits can be taxable.
The scary part? These thresholds haven't been adjusted for inflation since they were created decades ago. As the Cost-of-Living Adjustment (COLA) pushes your monthly check higher—it’s a 2.8% bump in 2026—more and more retirees are "bracket creeping" into the taxable zone. It’s a quiet tax hike that hits a little harder every year.
Why the "One Big Beautiful Bill" Changes the Game for 2026
If you've been following the news, you might have heard about the One Big Beautiful Bill Act (Public Law 119-21) signed in 2025. It didn't technically "repeal" the tax on Social Security, but it threw seniors a massive bone.
Starting in tax year 2025 and continuing through 2028, there’s a new Senior Deduction.
If you’re 65 or older, you can claim an additional $6,000 deduction on top of the standard deduction. If you’re a married couple and both are over 65, that’s a $12,000 shield. For a lot of middle-income folks, this new deduction basically wipes out the tax liability created by their Social Security benefits.
However, there is a catch. This specific $6,000 bonus starts to phase out once your income hits $75,000 for singles or $150,000 for couples. If you’re a "wealthy" retiree with a big pension or a fat IRA, this new law might not help you much. You'll still be looking at that 85% taxable rate.
Real-World Example: Meet "Retired Rick"
Let’s use an illustrative example to see how this actually looks on a 1040 form.
Rick is single and 67 years old. In 2026, he receives $24,000 in Social Security benefits. He also withdraws $20,000 from his traditional IRA to cover travel and property taxes.
First, we calculate his "combined income":
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- His IRA withdrawal: $20,000
- Half of his Social Security: $12,000
- Total Combined Income: $32,000
Since $32,000 is between the $25,000 and $34,000 thresholds, Rick will pay tax on a portion of his benefits. Specifically, about $3,500 of his Social Security will be added to his taxable income.
But wait! Because of the new tax laws, Rick’s standard deduction is now higher. Between the normal standard deduction for 2026 ($16,100) and the new Senior Deduction ($6,000), Rick has a massive $22,100 shield. In the end, Rick might end up paying very little, if anything, in actual fed tax on social security because his total deductions are so high.
Strategies to Keep the IRS Away from Your Check
You aren't totally helpless here. There are ways to manage your income so you don't get smacked by the 85% rule.
Watch your RMDs.
Required Minimum Distributions from traditional IRAs can spike your income and trigger the Social Security tax. If you don’t need the money, consider a Qualified Charitable Distribution (QCD). This lets you send money directly to a charity from your IRA without it ever showing up as "income" on your tax return.
The Roth Conversion trick.
Roth IRA withdrawals are generally tax-free and don't count toward your combined income. Converting traditional IRA funds to a Roth before you start taking Social Security can be a brilliant move. You pay the tax now so you don't have to pay it on your benefits later.
Withhold at the source.
If you know you’re going to owe, don't wait until April to find out how much. You can ask the Social Security Administration to withhold 7%, 10%, 12%, or 22% of your monthly check for federal taxes using Form W-4V. It hurts to see a smaller check every month, but it beats a $3,000 surprise bill during tax season.
Don't Forget the State Level
While we’re talking about fed tax on social security, remember that your state might want a cut too. As of 2026, only eight states still tax Social Security benefits: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont. If you live anywhere else, your state taxes are one less thing to worry about.
The rules are complicated, and honestly, they feel a bit unfair to people who saved their whole lives. But the IRS is nothing if not consistent. They follow the formula. If you stay under those $25,000/$32,000 thresholds, you can keep your benefits to yourself.
Actionable Next Steps for Tax Season
- Calculate your provisional income early. Don't wait for your SSA-1099 in January. Look at your current 401(k) withdrawals and estimate where you'll land.
- Check your eligibility for the new Senior Deduction. If you are 65+, ensure you are claiming that extra $6,000 ($12,000 for couples) introduced by the recent tax legislation.
- Evaluate your "tax-free" interest. Remember that even "tax-exempt" municipal bond interest is added back when calculating if your Social Security is taxable. It’s a common trap.
- Consult a pro if you're over the limit. If your combined income is pushing $44,000 as a couple, a CPA can help you shift assets—like using a HECM or a Roth—to lower that number before the year ends.