Social Security & Taxes: What Retirees Need to Know
Integrating Taxes Into Your Retirement Plan
For many retirees, Social Security is more than a monthly benefit, it’s a cornerstone of their retirement income plan. But what often surprises people is that those benefits can be taxable, depending on how much other income you earn throughout the year. The rules can feel confusing, and small changes, such as taking a required minimum distribution (RMD), realizing investment gains, or doing part-time consulting, can unexpectedly push more of your Social Security benefits into taxable territory.
In this article, we’ll explain when Social Security becomes taxable, how your other income impacts the calculation, and what strategies can help you manage the tax side of your retirement income more effectively.
When Social Security Benefits Become Taxable
Social Security isn’t automatically tax-free. The IRS uses something called “provisional income” to determine how much of your benefit is taxable. Provisional income includes:
One-half of your Social Security benefits
Plus other income (like IRA withdrawals, pensions, wages, or interest)
Plus any tax-exempt interest (such as from municipal bonds)
Once your provisional income crosses certain thresholds, a portion of your Social Security benefits—up to 85%—can become taxable.
For 2026, those income thresholds remain:
Single filers:
Below $25,000 → No tax on benefits
$25,000–$34,000 → Up to 50% may be taxable
Above $34,000 → Up to 85% may be taxable
Married filing jointly:
Below $32,000 → No tax on benefits
$32,000–$44,000 → Up to 50% may be taxable
Above $44,000 → Up to 85% may be taxable
So, if you’re a married couple with $40,000 in Social Security benefits and $30,000 coming from IRA withdrawals, you’re likely paying tax on a portion of your Social Security income.
How Other Income Affects the Calculation
Here’s where retirees often get caught off guard: every additional dollar of income can trigger more of your benefits to be taxed.
Common contributors include:
RMDs (Required Minimum Distributions): Once you reach age 73 (or 75), these withdrawals can bump up your taxable income and make more of your benefits taxable.
Part-time work: Even modest earnings can push you above the threshold.
Investment income: Capital gains, interest, and dividends all increase provisional income.
Tax-exempt income: Even municipal bond interest counts toward the calculation, despite being "tax-free" otherwise.
Because of this interplay, the effective tax rate on your income can feel unusually high—even though your marginal tax bracket hasn’t changed.
Strategies to Reduce or Manage Tax Exposure
Fortunately, with careful planning, you can influence how much of your Social Security is taxable. Some ideas include:
Roth conversions before claiming benefits: Converting some traditional IRA funds to Roth while you’re in a lower tax bracket (often before age 73 or 75) can reduce future RMDs.
Coordinating withdrawals: Drawing from different accounts strategically—taxable, tax-deferred, and Roth—can help control provisional income.
Delaying Social Security: Waiting a few years to claim benefits can increase your monthly check and provide more flexibility to manage income earlier in retirement.
Charitable giving from IRAs (QCDs): If you’re charitably inclined, donating directly from your IRA can satisfy RMDs without increasing your taxable income.
Each retiree’s situation is unique, so working with a financial advisor who understands both investment strategy and tax implications is key.
Integrating Taxes Into Your Retirement Plan
At Windward, we believe thoughtful income planning goes beyond investment performance. It’s about designing a tax-smart withdrawal strategy that keeps more of your income working for you. Our team helps Kansas City retirees and families coordinate Social Security, IRA distributions, and investments to create an efficient, predictable income plan that supports their lifestyle long-term.
If you’d like to explore how Social Security fits into your retirement income plan, we’re here to help. Contact us
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