Social Security: How It’s Taxed, How to Save

How much tax you pay on your Social Security benefits, if any, depends on your income from all taxable sources.
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Written by Liz Weston, CFP®
Senior Writer
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Edited by Chris Hutchison
Lead Assigning Editor
Fact Checked
How Is Social Security Taxed?

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Social Security retirement benefits are subject to federal income tax for most people, though a portion of the benefits are exempt from taxes. People with lower total retirement income get larger exemptions. Most states don’t tax Social Security. Supplemental Security Income (SSI) is not taxable.

At what age is Social Security no longer taxed?

Social Security retirement income can be taxable no matter how old you are. Whether your Social Security benefits are subject to income tax depends on your total income, not your age

Social Security Administration. Retirement Ready Fact Sheet For Workers Ages 70 And Up. Accessed Aug 28, 2023.

Social Security Disability Insurance (SSDI), which is a separate program for people with qualifying disabilities, also may be taxable.

However, Supplemental Security Income (SSI) is not taxable. SSI is a monthly Social Security benefit for people with limited resources, low incomes and who are blind, disabled or 65 or older.

Determine how your Social Security is taxed

Federal taxes

Two factors determine the percentage of your Social Security that’s taxable:

  1. Annual combined income. "Combined income" includes your adjusted gross income, any nontaxable interest you receive and half your Social Security benefits.(Adjusted gross income includes earnings, investment income, retirement plan withdrawals, pension payments and other taxable income.)

    Social Security Administration. Income Taxes And Your Social Security Benefit . Accessed Jun 6, 2023.

  2. Marital status. Married people have higher limits before taxes kick in.   

The percentage of your Social Security retirement benefit that’s “taxable” isn’t equal to the percentage you pay in taxes. For example, if your annual Social Security benefit is $20,000 and 50% is taxable, you won’t lose half to taxes; it means you’ll only pay taxes on $10,000 of your Social Security benefits. Even if 85% of your benefit is taxable — which is the maximum amount — you’re still getting a 15% exemption compared to earned income.

Your actual tax bill is determined by federal income tax rates, which currently range from 10% to 37%. The IRS has a worksheet to help you figure your tax, or you can use tax software. If your annual combined income is low enough, you won’t owe any taxes on your Social Security.

State taxes

Where you live determines whether you also owe state taxes. Most states don’t tax Social Security, and states that do tax it typically exempt a percentage or a dollar amount.

Beware the Social Security tax torpedo

The way Social Security taxes work can cause a sharp rise and then drop in marginal tax rates, sometimes called the “tax torpedo.” (A marginal tax rate is basically how much additional tax you pay on an additional dollar of income.)

Here's why: The income thresholds at which more of your Social Security is taxed are not the same as federal tax brackets. You might have other income, such as Roth IRA withdrawals, that don’t push your total income into higher tax brackets. But going from 0% to 50% of your benefit being taxable (or 50% to 85%) has the effect of boosting your marginal tax rate, even if your federal tax bracket doesn’t change.

Once your income exceeds a certain level and you've paid all the taxes on your benefit you could possibly pay, your marginal tax rate settles back down to equal your federal tax bracket.

Delaying Social Security benefits could trim your taxes

Middle-income people can reduce the tax torpedo’s effect by delaying the start of Social Security benefits until age 70 and taking income instead from retirement accounts or other savings, according to researchers William Reichenstein, a professor at Baylor University, and William Meyer, founder and managing principal of Social Security Solutions Inc., who presented their findings in the July 2018 Journal of Financial Planning

. The larger benefit at age 70 means people can draw less from their other accounts, resulting in a lower tax bill.

Taking withdrawals from tax-deferred accounts early in retirement also can reduce the required minimum distributions (RMDs) that begin at age 72 or 73


The tax torpedo also affects higher-income people, but there's not much they can do about it once 85% of their benefits are subject to taxation. Instead of worrying about the torpedo, their focus instead should be strategies to reduce the income that determines premiums for Medicare Part B and Part D, the researchers found.

🤓Nerdy Tip

Did you know that Medicare Part B premiums are usually automatically deducted from your Social Security retirement checks? Learn more about how much Medicare actually costs.

Juggling all this is complicated enough that it can pay to consult a tax pro before you start Social Security or withdrawals from retirement funds.

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