After spending your entire life working hard and contributing to payroll taxes, you may be surprised to find that Uncle Sam could come to take a chunk off your Social Security benefits.
In fact, up to 85 percent of your Social Security retirement benefits could be taxed. But don’t fret. There are some key steps you can take in order to reduce the taxes on your Social Security paychecks or avoid them all together.
But before we get into that, you need to understand how Social Security benefits are taxed.
How Is Social Security Taxed?
The government taxes Social Security benefits based on your “combined income.” This is also referred to as provisional income.
Here’s the formula the IRS uses to determine combined income:
Combined income = Adjusted gross income (AGI) + nontaxable interest + 50 percent of your Social Security benefits.
Single filers with a combined income of less than $25,000 will have none of their benefits taxed. But if it’s between $25,000 and $34,000, up to 50 percent of their benefits will be taxed. And if it’s $34,000 or more, up to 85 percent of it will be taxed.
Those who are married and filing jointly and have combined incomes below $32,000 will have none of their benefits taxed. If it’s between $32,000 and $44,000, up to 50 percent will be taxed. And if it’s over $44,000, up to 85 percent would be taxed.
So basically, you’d need to reduce your combined income to lower or avoid taxes on your Social Security benefits.
But to do that, we need to better understand the parts that go into combined income.
What Is Combined Income?
To better understand the combined income formula, let’s start with the first part. AGI is your gross income minus certain adjustments like contributions to a traditional individual retirement account (IRA). Gross income includes money like wages, interest, dividends, capital gains, and distributions from traditional 401(k)s and IRAs.
Tax-exempt interest can come from sources such as municipal bonds as well as Series EE and Series I bonds used for qualified higher education expenses.
The size of your Social Security checks depends on several factors, such as your earnings history and when you decide to claim. You can get a better picture by opening a my Social Security account online.
So, now that we have a better understanding of combined income and how Social Security is taxed, let’s look at ways to reduce the impact of these taxes.
Consider a Roth Conversion
If you have funds in a traditional IRA or 401(k), you could convert these to a Roth IRA. Withdrawals from a Roth IRA won’t impact the taxation of your Social Security benefits.
But there are more benefits to a Roth IRA. Money in a Roth IRA grows tax-free. And withdrawals are tax-free as long as you’re at least 59½ years old and at least five years have elapsed since you funded the Roth account.
And here’s another major benefit: Roth IRAs don’t involve required minimum distributions (RMDs). These are certain amounts of money you must withdraw from accounts like traditional IRAs and 401(k)s once you reach age 73. These distributions would be considered taxable income and could increase your combined income, potentially increasing the taxes on your Social Security benefits.
So, Roth IRAs seem very enticing.
But there’s a catch. The amount you convert from a traditional IRA or 401(k) into a Roth IRA will be taxed at your applicable income tax rate, because it would generally be considered taxable income.
But you can convert as little or as much as you want. Some advisers recommend you convert only the amount that could bring you to the top of your current federal income tax bracket. You also want to make sure that you have money from a non-retirement account to pay these taxes upfront.
You can work with a qualified financial adviser to figure out what’s the best strategic way to pursue a Roth conversion.
Strategically Manage Your Investments
If you have investments like stocks in a taxable brokerage account and they’ve significantly increased in value, you may be inclined to sell them for a profit—especially if you’re no longer collecting a paycheck.
But by doing so, you may incur capital gains, which factor into your combined income, and you’d owe capital gains taxes. If you held onto these assets for a year or less, you could pay up to 37 percent in capital gains taxes depending on your income.
But you could reduce or eliminate capital gains taxes through tax-loss harvesting. This is the strategy of selling assets that have depreciated in value in order to offset capital gains from selling assets that have appreciated in value.
If your losses are greater than your gains, you won’t owe capital gains taxes. Plus, the Internal Revenue Service allows you to use what’s left over to offset up to $3,000 of your ordinary taxable income. So let’s say your investment losses were $5,000 greater than your investment gains. You then can deduct the full $3,000 from your taxable income. In addition, the IRS allows you to use anything left over $3,000 to offset income for future tax years. In this scenario, that’s $2,000.
But there are other ways to strategically manage investments in a tax-efficient manner.
Remember, investments in a brokerage account may generate taxable income through interest, dividends, and capital gains.
But you can move some of these income-generating assets into tax-efficient investments such as municipal bonds, which are generally exempt from federal and state income taxes. You can also consider tax-exempt exchange-traded funds (ETFs) and tax-exempt mutual funds. These strategies could keep allowing your funds to grow without increasing taxable income.
But it’s important to note that interest generated from municipal bonds goes into combined income.
Strategically Donate to Charity
Donating to charity would not only allow you to help those in need, but it could also reduce your tax liability.
Starting in 2026, single filers can deduct up to $1,000 and joint filers can deduct up to $2,000 in cash donations to a qualified charity. What’s new about this is that typically, you would need to itemize your taxes in order to claim charitable deductions. But this rule also applies to those who take the standard deduction, which most taxpayers do.
And if you’re 75½ or older, you can donate up to $111,000 from your IRA to a qualified charity through what’s called a qualified charitable contribution (QCD). This won’t provide you with a tax deduction. But it won’t count as taxable income, and it could count toward your RMD.
The Bottom Line
Social Security is taxed based on your combined income. So reducing your combined income could allow you to reduce or eliminate taxes on your Social Security benefits.
There are several ways to do this, such as doing a Roth conversion, strategically managing taxable investments, and donating to charity. But these aren’t one-size-fits-all solutions. You should consult a qualified financial and tax adviser to figure out what your best options are when it comes to minimizing the burden of taxes on your hard-earned Social Security benefits.
The Epoch Times copyright © 2026. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
