Will My Social Security Benefits Be Taxed?

With so many taxpayers having other retirement benefits to rely on, Social Security (SSI) may not be your only retirement income source, though it can still play a major role to assist with Medicare coverage and spending needs. According to the Social Security Administration (SSA), your maximum monthly benefit depends on the age you retire.  

For example, if you retire at your full retirement age this year, your maximum monthly benefit would be $4,018. Full retirement age (FRA) for 2025 applies to those born in 1960 or later, or age 67. However, if you retire early at age 62 in 2025, your maximum benefit would be $2,831. If you delay retirement until age 70, your maximum benefit would be $5,108.¹   

Regardless of when you start SSI, the benefits would increase based on cost-of-living (COLA) adjustments.  

For individuals receiving Social Security benefits before their full retirement age in 2025, there’s an annual earnings limit from work and consulting activities of $23,400. If earnings exceed this limit, $1 in benefits will be deducted for every $2 earned above the limit.  

• Example:  If your total earnings for the year are $33,400, you would have exceeded the limit by $10,000. Your SSI benefits would be reduced by $5,000 (half of $10,000).  

When you reach your full retirement age, a different set of rules apply. There’s a higher earnings limit (in 2025, $62,160), and only earnings before your FRA month are counted when determining benefit reductions.  

Once you reach FRA, your full retirement age, your SSI benefits are no longer reduced due to your earnings.   

Your health and wealth can certainly play an important part in deciding when to start claiming benefits.   

If you have other retirement income, such as 401(k) or 403(b) plans, IRA funds or a part-time job, you may have to pay income taxes on your monthly Social Security benefits. To help ensure you retain as much of your benefits as possible, it’s important to understand how Social Security benefits are taxed and what you can do to manage them. 

Is Social Security taxed? It depends.

The IRS determines how much of your Social Security is taxable based on your combined income. This includes your modified adjusted gross income (MAGI), which equals your adjusted gross income (AGI) plus nontaxable interest, and half of your Social Security benefits. As shown below, the thresholds for when your benefits will be taxable vary based on your filing status. 

Social Security Federal Income Tax

Combined annual income for individuals	$25,000 or less: No tax on benefits  $25,001 to $34,000: Up to 50% taxed  Over $34,000: Up to 85% taxed
Combined annual income for married filing jointly	$32,000 or less: No tax on benefits  $32,001 to $44,000: Up to 50% taxed  Over $44,000: Up to 85% taxed

Summary of the new, temporary OBBBA changes impacting taxes on Social Security

Under the newly enacted One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, a new, temporary deduction for seniors aged 65 or older is available starting this year, 2025 through the end of 2028.  

Social Security beneficiaries need to know that while the OBBBA can offer tax relief to some, it doesn’t eliminate Social Security taxes, directly or permanently.  

It is important to note that this deduction does not eliminate taxes on Social Security benefits, but reduces the taxable income for qualifying seniors, by making more income eligible for the standard deduction and potentially reducing the portion of Social Security benefits subject to tax.  

This deduction is equal to $6,000 for single filers and $12,000 for married couples filing jointly, where both spouses qualify.  However, the deductions phase out at higher income levels, specifically when modified adjusted gross income (MAGI) exceeds $75,000 for single filers and $150,000 for married couples filing jointly. The deduction phases out completely for those with MAGI exceeding $175,000 for individuals and $250,000 for couples. 

• Example:  Consider a married couple where both spouses are 65 or older, and their MAGI is $200,000. 
  • The deduction starts phasing out at $150,000 for joint filers and is fully phased out at $250,000. 
  • The amount exceeding the threshold is $50,000 ($200,000 less $150,000). 
  • The deduction phases out at a rate of 6%. 
  • The reduction of the deduction in this example is $50,000 x 6% or $3,000 per spouse. 
  • The couple’s total senior deduction is $6,000 ($3,000 each).  

State taxation of Social Security benefits in 2025

While most states do not tax Social Security benefits, nine states continue to do so in 2025. These states include Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia. West Virginia’s taxation of SSI benefits is being phased out and will be fully eliminated by 2026.  

However, it’s important to note that even for residents of these states, there are often deductions, credits, or income limits that can reduce or eliminate the tax burden for retirees.  

Strategies to help minimize Social Security taxes

A thoughtful retirement income plan can help reduce how much of your benefit is taxed. These four strategies may help: 

1. Think beyond the current year. A large one-time income event, like selling a business or property, could push you into a higher tax bracket. Instead of accepting a lump sum, consider an installment plan to spread the income across several years. This approach could keep your combined income below a threshold that triggers higher Social Security benefit taxes. 
2. Be strategic with IRA withdrawals. Withdrawals from traditional IRAs count as taxable income, but qualified Roth IRA distributions do not. A balanced withdrawal strategy between traditional and Roth accounts may help reduce your overall taxable income and the percentage of Social Security benefits taxed. 
3. Use nonretirement assets carefully. Tax-deferred vehicles such as deferred annuities can delay income until your tax rate is lower. If you expect your taxable income to drop in a few years, this could be a beneficial option. A wealth advisor or tax professional can help structure the timing to suit your goals. 
4. Know the rules about working in retirement. Claiming Social Security before reaching full retirement age can reduce your benefits if you earn above a certain limit. In 2025, the annual earnings limit is $22,320. If you earn more, your benefits are reduced by $1 for every $2 over the limit. Once you reach the year you turn full retirement age, the limit increases to $59,520, and the penalty is reduced to $1 for every $3 over. After reaching full retirement age, there’s no earnings limit.  

Example: If a retiree earns $35,000 before full retirement age, that’s $12,680 over the 2025 earnings limit. This would reduce annual benefits by $6,340. However, once full retirement age is reached, benefits are recalculated to credit the withheld amount over time. 

For more information on how much you can earn and still get Social Security benefits, visit the Social Security website.  

Interested in more details on how the newly passed One Big Beautiful Bill Act might impact your Social Security benefits? Read our article to learn more about President Trump’s Social Security tax reform.

Taxes on Social Security benefits can catch retirees off guard. A forward-looking retirement income strategy that balances withdrawals and earnings may help preserve more of your benefits for the long run. For more information on Social Security, visit our library of articles. If you are not a client and would like to learn how to help keep taxes on your Social Security in check, let’s talk. 

¹ “What is the maximum Social Security retirement benefit payable?” Social Security Administration, Jan. 2, 2025.

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