Those who receive Social Security benefits might assume they’re tax-free. Unfortunately, that isn’t always the case. During tax season, many retirees receive a surprise tax bill because their combined income exceeds the thresholds. As a result, they may have to pay taxes on up to 85% of their benefits.
The good news? By taking action before the year ends, you can reduce the amount of tax on your benefits — and ultimately keep more of it.
With that said, here’s a practical roadmap you can follow right now.
Understand the Tax Basics for Social Security Benefits
Before implementing any strategies, you need to know how tax rules work. The IRS uses the “combined income” formula to determine if your Social Security benefits are taxable.
For the 2026 tax year, the formula to determine the taxability of Social Security benefits remains: Adjusted Gross Income (AGI) + Tax-Exempt Interest + 1/2 of Social Security Benefits = Combined Income.
Key 2026 Federal Taxable Thresholds:
| Filing Status | Combined Income | Taxable Amount of Benefit |
| Individual / Single | Below $25,000 | 0% (Not Taxable) |
| $25,000 – $34,000 | Up to 50% | |
| Above $34,000 | Up to 85% | |
| Married (Joint) | Below $32,000 | 0% (Not Taxable) |
| $32,000 – $44,000 | Up to 50% | |
| Above $44,000 | Up to 85% |
Important 2026 Considerations:
There is no inflation adjustment.
Income thresholds ($25k and $32k) remain frozen at decades-old levels. Due to the 2.8% COLA increase in your benefits this year, you are more likely to exceed these limits in 2026 than in previous years.
Maximum tax cap.
No matter what your income level is, 85% of your benefit can be taxed.
A new deduction for seniors will be introduced in 2026.
For the 2026 tax year, those 65 or older can take advantage of a new senior deduction. From your income, you can deduct up to $6,000 (single) or $12,000 (joint). Even though the “combined income” formula doesn’t change, this lowers your overall taxable income, reducing your benefits tax bill.
Earnings test limits. In 2026, if you are still working, you must:
- Under the full retirement age. There is an exemption amount of $24,480.
- Reaching full retirement age in 2026. $65,160 is the exempt amount.
State taxes.
In 2026, only eight states will continue to tax Social Security: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont. This year, West Virginia completed its phase-out.
The key takeaway?
It’s unlikely that your benefits will become taxable over time if the threshold numbers aren’t adjusted for inflation. If you take action now, before the 2026 tax year ends, you may be able to reduce this tax burden.
Project Your 2025 Income and Set a Target
We have only a few weeks left in the year, so it’s time to act. To get started, follow these steps;
- Determine your adjusted gross income (AGI) for 2026: wages, retirement account distributions, taxable interest/dividends, business income, and pension income.
- In addition to your expected Social Security benefits, add tax-exempt interest, like municipal bond interest.
- Compare the results to the thresholds ($25K single / $32K married joint).
- Note: If you’re already in the above, consider strategies that lower your taxable benefits. Among other things, you can reduce your combined income or place your income in nontaxable categories.
If you know where you stand now, you can make decisions in the last few months of 2026 that will affect your tax liability next spring.
Strategies to Reduce Your Taxes on Your Social Security Benefits Before the Year Ends
Withdraw From Roth Accounts First
The best way to save for retirement is to utilize tax-advantaged retirement accounts carefully.
- Make withdrawals from your Roth IRA or Roth 401(k) (if you have one) rather than your traditional tax-deferred IRA/401(k). Why? In most cases, Roth distributions are not taxable and therefore do not count toward the Social Security combined income threshold.
- Alternatively, distributions from traditional IRAs and 401(k)s are taxed income, increasing your AGI and pushing up your gross income, which in turn makes your Social Security more taxable.
- Withdrawals from seasoned Roth accounts, those at least five years old, are tax-free if you’re over the age of 59 ½.
The bottom line? When you prioritize Roth distributions (if available), you reduce taxable income and protect more of your Social Security benefits.
Time and Size Your Traditional IRA/401(k) Withdrawals
Regardless of whether you have a Roth or must tap traditional accounts, you can still be strategic.
- When calculating your RMD (Required Minimum Distribution) for 2026 (for traditional IRAs/401Ks), consider how large the distribution will be and when you will take it. The RMD age for individuals born 1951–1959 is 73. The first RMD is due by April 1, 2027, if you turn 73 in 2026.
- If you receive a large distribution late in the year, your combined income may exceed a certain level. Think about splitting distributions into smaller ones or taking them early in the year when your income is lower.
- If you are 70 ½ or older, consider making Qualified Charitable Distributions (QCDs). For 2025, you can transfer up to $108,000 directly from your IRA to a qualified charity — and it won’t count as taxable income. In 2026, the limit will increase to $124,000, allowing tax-free transfers to charities to reduce Adjusted Gross Income (AGI).
- Unlike Roth IRAs, Roth 401(k)s will no longer be subject to lifetime RMDs as of 2024–2026.
- Since RMDs can spike taxable income, it remains crucial to manage AGI, Social Security taxation, and Medicare premiums (IRMAA) in the early part of the year, rather than at year-end, for income management.
- When it comes to business/pass-through income, shifting income or expenses between 2025 and 2026 is still an effective tax-reduction strategy.
- Individuals over 50 earning more than $150,000 will have to contribute to Roth accounts for catch-up contributions to 401(k)s in 2026.
Convert Traditional Funds to Roth, Carefully
While this isn’t right for everyone, it can be effective if you take action in advance.
- A partial Roth conversion creates taxable income today when funds are transferred from traditional IRAs/401ks to Roth IRAs. However, if you follow the rules and withdraw funds from your Roth, your future withdrawals will not count toward your Social Security tax.
- By paying tax now, you avoid pulling large taxable distributions later, and you reduce your exposure to Social Security taxation.
- Nevertheless, you should be careful: Conversion increases your taxable income in the year it is done, so you should consider whether the immediate tax cost is worth the long-term benefit.
Delay Claiming Social Security (If You Can)
If you haven’t started your benefits yet and can wait, you may be able to get a better rate.
- By delaying your Social Security claim past your full retirement age, you will receive a higher monthly benefit. If you receive a higher retirement benefit later in life, you will be able to withdraw less money from taxable retirement accounts earlier, resulting in a lower combined income.
- While delaying depends on your health, income needs, and life expectancy, from a tax-optimization standpoint, it can reduce your exposure to benefit taxes.
Monitor and Control Other Income Sources
Because Social Security taxability is tied to combined income, considering non-benefit sources is important.
- Your AGI is calculated based on interest, dividends, capital gains, business income, pension income, etc.
- Tax-exempt interest is also possible.
- Move taxable investments into contexts that produce less taxable income (or more favorable treatment) if possible. As an example, long-term growth stocks generate capital gains when sold, not annual interest. In turn, the annual income hit could be reduced.
- If you’re still working, plan your wages or self-employment income late in the year to avoid bumping up your 2026 combined income.
Withhold Taxes or Make Estimated Payments
The sooner you plan, the less likely you are to owe tax on your Social Security benefits.
- Withholding federal income taxes from your monthly benefit is an option you can request from the Social Security Administration (SSA). You can choose to have 7%, 10%, 12% or 22% of your payment withheld by the Social Security Administration.
- Alternatively, you can pay the IRS quarterly estimated taxes so you don’t get stuck with a large tax bill — and a possible penalty.
To put it simply, avoiding unpleasant surprises starts with getting ahead of it.
Practical End-of-Year Checklist (for 2026)
For the final months of the year, here’s a simple checklist;
- In 2026, estimate your combined income (AGI + tax-free interest + 1/2 Social Security).
- Compare to your threshold (single: $25K; married, joint: $32K).
- Have you reviewed your retirement account distribution strategy? Are you withdrawing from traditional accounts? Is it possible to shift expenses or withdrawals?
- You may be able to convert your Roth accounts if you have them and can do conversions.
- When taking RMDs, consider timing and charitable options (QCD).
- Are there any other income sources (interest, dividends, business income) that could be delayed, reduced, or shifted?
- Determine whether an adjustment should be made to withholding from SSA benefits or whether an estimated payment should be made.
- If you have questions regarding tax laws in your state or financial planning, speak to a tax professional or financial adviser.
- For filing purposes, you will want clear records of all your moves.
Why This Matters—And What You Risk If You Don’t Act
You may face the following problems if you ignore this issue;
- You will be taxed more on your Social Security benefits (50% → 85%).
- Tax bills that are higher than expected.
- The more taxes you pay today, the less income you will have in retirement.
- Even worse, if you withdraw large amounts from taxable retirement accounts and receive taxable benefits, you could accelerate your tax exposure and reduce your financial flexibility.
Ultimately, the more you plan ahead, the more tax-free benefits you can earn.
Conclusion: Take Control Before 2026 Arrives
People don’t anticipate the pitfalls of taxing their Social Security benefits in retirement. It is, however, avoidable if you’re proactive.
You don’t need perfect timing or magical investments to succeed. The most important thing is to understand your situation and make informed decisions in the last months of the year: Roth distributions, traditional withdrawal timing, QCDs, income shifting, and withholding/estimated taxes.
Let’s look at 2026 with confidence instead of regret will allow you to start 2026 with confidence. With smarter choices, you’ll be able to protect more of your income, keep more benefits tax-free, and make wiser decisions.
Image Credit: Markus Winkler; Pexels
