How much can a retired person earn without paying taxes on Social Security?

Approximately 40% of Social Security recipients pay federal income tax on their benefits, a fact that surprises many retirees. For those wondering how much can a retired person earn without paying taxes on Social Security, the answer hinges on their "combined income"—not just their earned income from a job.

Quick Summary

This article explains federal income thresholds that determine if a retired person must pay taxes on their Social Security benefits. It details the combined income formula, filing status tiers, and offers strategies to manage income levels and minimize tax liability.

Key Points

• Federal income tax on Social Security is determined by your "combined income.": This isn't just your earnings, but a formula of your Adjusted Gross Income (AGI) plus nontaxable interest and half of your Social Security benefits.

• Taxability depends on your filing status and combined income. Combined income thresholds vary by filing status, determining if benefits are taxable.

• Exceeding thresholds triggers tiered taxation. If combined income is over the base thresholds, up to 50% of benefits may be taxed; if over higher tiers, up to 85% may be taxed.

• Strategic withdrawals from Roth accounts can lower combined income. Because distributions from Roth IRAs and 401(k)s are not taxable, they do not increase your combined income and can help you stay under tax thresholds.

• Some states also tax Social Security benefits. While most states do not, a handful still tax benefits, and the rules vary by state.

• Managing your taxable retirement withdrawals is a key strategy. Being mindful of withdrawals from traditional retirement accounts can help control your combined income and reduce tax liability.

Understanding the combined income threshold

To determine if your Social Security benefits are taxable, the IRS uses a calculation called "combined income" or "provisional income". This calculation includes your adjusted gross income (AGI), nontaxable interest, and half of your Social Security benefits.

Federal income thresholds for 2025 are:

• For individual filers, benefits are generally not taxable below a certain combined income.
• For married couples filing jointly, benefits are generally not taxable below a different combined income threshold.

How is combined income calculated?

The formula for combined income is:

Combined Income = Adjusted Gross Income (AGI) + Nontaxable Interest + 1/2 of your Social Security benefits

Your AGI includes income from sources like pensions, investments, and traditional retirement account withdrawals, but initially excludes Social Security benefits.

The tiered taxation of Social Security benefits

If your combined income exceeds the initial thresholds, a portion of your Social Security benefits becomes taxable on a tiered basis, up to a maximum of 85%.

Filing as an individual

For single filers, specific income ranges determine if up to 50% or up to 85% of benefits may be taxed.

Filing as married, filing jointly

For couples filing jointly, different income ranges apply for the 50% and 85% taxability tiers.

Other considerations

Married individuals filing separately may face different rules, especially if they lived with their spouse during the year.

Comparison of combined income thresholds (2025)

A table detailing the combined income thresholds for different filing statuses can be found on the {Link: SSA website https://www.ssa.gov/faqs/en/questions/KA-02471.html}. These thresholds indicate the combined income levels where no benefits are taxed, up to 50% are taxed, and up to 85% are taxed.

Note: Special rules apply for married filing separately. If you lived with your spouse at any time during the year, your benefits will likely be taxable.

Strategies to manage taxable income

Managing your combined income is key to minimizing federal taxes on your Social Security benefits.

• Leverage Roth accounts: Withdrawals are tax-free and do not contribute to combined income.
• Control Traditional IRA/401(k) withdrawals: These are taxable and increase combined income. Plan withdrawals strategically before RMDs.
• Consider Roth conversions: These can reduce future RMDs and taxable income. Consult a tax advisor for timing.
• Manage capital gains: Capital gains from investments increase combined income. Use strategies like tax-loss harvesting.
• Time income distribution: Control the timing of other income sources to stay below tax thresholds.

State taxation of Social Security benefits

A few states also tax Social Security benefits, though most do not or offer exemptions. Rules vary by state.

Conclusion

For retired individuals, avoiding federal taxes on Social Security benefits is possible through careful planning focused on managing combined income. Utilizing Roth accounts and strategically managing other taxable income sources are key strategies. Understanding these rules is vital for maximizing retirement income. Consulting a tax professional is recommended for personalized advice.

Frequently Asked Questions

What is included in the 'combined income' for Social Security tax purposes?

Combined income includes your Adjusted Gross Income (AGI), any nontaxable interest, and half of your annual Social Security benefits. This formula determines if your benefits are taxable at the federal level.

At what income level do federal taxes on Social Security benefits begin for single filers?

For single filers, federal taxes on Social Security benefits begin once your combined income exceeds a specific threshold. For combined income within a certain range, up to 50% of your benefits may be taxed. You can find detailed thresholds on the {Link: SSA website https://www.ssa.gov/faqs/en/questions/KA-02471.html}.

What are the combined income limits for married couples filing jointly?

Married couples filing jointly will not pay federal tax on their Social Security benefits if their combined income is below a specific threshold. Up to 50% of benefits may be taxed within a higher combined income range, and up to 85% above that. Specific limits are available on the {Link: SSA website https://www.ssa.gov/faqs/en/questions/KA-02471.html}.

Will I pay taxes on Social Security if it's my only source of income?

If your only source of income is Social Security benefits, it is unlikely that you will have to pay federal income tax. The combined income calculation would likely fall below the tax thresholds for both single and joint filers.

Can withdrawals from a Roth IRA increase taxes on my Social Security benefits?

No, withdrawals from a Roth IRA or Roth 401(k) are not included in your combined income calculation because they are tax-free. This makes them a useful tool for managing your tax liability in retirement.

How can I reduce my combined income to avoid paying taxes on Social Security?

Strategies include making withdrawals from Roth accounts, controlling distributions from traditional retirement accounts, and implementing tax-loss harvesting for investment gains. Charitable donations from a traditional IRA can also help.

Do I need to worry about state taxes on my Social Security benefits?

Possibly, depending on where you live. While most states do not tax Social Security, a handful do, though many of these offer exemptions. It is important to check your state's specific tax laws.