Whether your Social Security is taxed depends on your total income. Here are the thresholds and ways to reduce the bite.
How much of my Social Security is taxable?
The IRS uses combined income, your adjusted gross income plus nontaxable interest plus half your Social Security benefits, to decide how much is taxable. For single filers, none is taxed below $25,000; up to 50% is taxable between $25,000 and $34,000; and up to 85% above $34,000. For married couples filing jointly, the thresholds are $32,000 and $44,000. At most, 85% of your benefits are ever taxable, never 100%. These thresholds have not been adjusted for inflation since the 1980s and 1990s, so more retirees cross them each year.
How can I reduce taxes on Social Security?
You can lower the tax on your benefits by managing other income. Drawing from a Roth IRA, which is not counted in combined income, timing large IRA withdrawals, and delaying your Social Security claim can all keep you under the thresholds. Qualified charitable distributions from an IRA also reduce taxable income. Because tax-efficient draws also affect your Medicare premiums through IRMAA surcharges, it pays to plan the two together. A licensed advocate at 1-800-MEDIGAP can help you see how Medicare costs and Social Security taxes interact.