Federal Tax Rules for 2026
For decades, the federal government has taxed Social Security benefits for recipients whose income exceeds certain thresholds. The 2026 tax year will see the continuation of these rules, but with an important addition for many retirees: a temporary tax deduction. Understanding your 'combined income' is the key to knowing your tax liability.
Combined income is calculated by adding your adjusted gross income, any tax-exempt interest income, and half of your annual Social Security benefits. The percentage of your benefits that is taxable depends on this figure and your filing status. The thresholds, which have not been indexed for inflation, are as follows:
- Up to 50% of benefits are taxable if: Your combined income is between $25,000 and $34,000 (for single filers) or between $32,000 and $44,000 (for those married filing jointly).
- Up to 85% of benefits are taxable if: Your combined income is more than $34,000 (for single filers) or more than $44,000 (for those married filing jointly).
In July 2025, the 'One Big Beautiful Bill Act' was signed into law, which includes a temporary $6,000 tax deduction for taxpayers aged 65 and older. This deduction is active for tax years 2025 through 2028. While it does not change the core tax rules, it effectively lowers the taxable income for many seniors, reducing or eliminating their tax bill. This legislative change is why it's projected that fewer seniors will owe federal tax on their Social Security benefits compared to previous years. However, those with higher combined incomes, especially above the $75,000 (single) or $150,000 (joint) Adjusted Gross Income limits for the deduction, may still face federal taxes on their benefits.
State Taxation on Social Security
Beyond federal taxes, whether your Social Security is taxed can also depend heavily on where you live. While most states do not tax Social Security benefits, a handful still do, though exemptions often exist. A key change for 2026 is that West Virginia is scheduled to complete its phase-out of state taxes on Social Security benefits, meaning it will join the majority of states in not taxing this income.
The list of states that still tax Social Security benefits in 2026 (based on 2025 rules and announced changes) includes:
- Colorado
- Connecticut
- Minnesota
- Montana
- New Mexico
- Rhode Island
- Utah
- Vermont
Many of these states offer varying exemptions or credits based on your income, and these rules can be subject to change. For example, some may exempt benefits once you reach full retirement age or if your income falls below a certain threshold. It's crucial for retirees in these states to review their state's tax laws or consult a tax professional.
Recent and Proposed Legislative Changes
The One Big Beautiful Bill Act (Signed July 2025): This is the key piece of legislation impacting 2026 taxes. The bill provides a temporary $6,000 senior tax deduction for individuals 65 and older for the 2025-2028 tax years. The deduction has a phase-out limit for those with higher incomes ($75,000 for single filers, $150,000 for married filing jointly), but will provide significant relief for many.
The You Earned It, You Keep It Act (Proposed): Separately, other legislative efforts, such as the bill introduced by Sen. Ruben Gallego, aim to permanently eliminate federal taxes on Social Security benefits starting in 2026. However, this is a proposed measure, and its passage is not guaranteed. Retirees should not assume this change is finalized for the 2026 tax year and should plan according to existing law.
Comparison of Federal Taxable Benefit Brackets
| Filing Status | Combined Income Thresholds | Percentage of Benefits Taxable |
|---|---|---|
| Single | Less than $25,000 | 0% |
| $25,000 to $34,000 | Up to 50% | |
| More than $34,000 | Up to 85% | |
| Married Filing Jointly | Less than $32,000 | 0% |
| $32,000 to $44,000 | Up to 50% | |
| More than $44,000 | Up to 85% |
How to Minimize Your Tax Burden
Planning for the taxability of Social Security involves more than just understanding the rules; it requires proactive financial management. Here are a few strategies seniors can employ to potentially minimize their tax burden on benefits:
- Control Your Combined Income: Strategically managing retirement withdrawals from different accounts can help. For example, withdrawing from Roth IRAs, which are generally not included in combined income calculations, might be a good option.
- Consider a Tax Professional: Tax laws are complex and can change. Consulting with a qualified tax professional is the best way to understand how your specific financial situation will be affected in 2026 and beyond.
- Request Tax Withholding: If you expect to owe tax, you can request to have federal income tax withheld from your monthly Social Security payments. This can help you avoid a large tax bill at the end of the year.
- Monitor State Tax Laws: For those living in or planning to move to a state that taxes Social Security, keep an eye on any pending legislative changes that could affect your tax situation. West Virginia's 2026 phase-out is a prime example.
Conclusion
So, will seniors have to pay taxes on Social Security in 2026? For many, the answer will be no, thanks to a temporary $6,000 tax deduction signed into law in July 2025. However, this is not a universal exemption. Higher-income retirees will still be subject to the long-standing federal combined income thresholds, where up to 85% of their benefits can be taxed. Additionally, residents in one of the handful of states that tax Social Security must still consider state tax liability, though West Virginia will become fully exempt in 2026. The key for all retirees is to assess their total combined income to determine their specific tax obligation for the upcoming year.
For more information on the temporary senior tax deduction and its specifics, you can visit the official IRS website.
Sources
- IRS.gov - Social Security and Medicare Withholding Rates
- Whitehouse.gov - No Tax on Social Security is a Reality in the One Big Beautiful Bill
- SSA.gov - Must I pay taxes on Social Security benefits?
