Do you have to pay taxes on Social Security?

Understanding Social Security taxes

Because the rules around taxes and Social Security will vary based on several factors, it's helpful to have a good understanding of your situation and which rules will apply to you. 

When is Social Security taxable?

The taxability of Social Security income depends on your combined income.

Understanding the income thresholds and how much of your Social Security income is taxable can help you plan your finances and minimize your tax liability.

The IRS also has an online tool to help you calculate the amount you may owe. 

Options for paying tax on Social Security

If you know you'll be taxed on Social Security, you have a few payment options. You can choose to have 7%, 10%, 12%, or 22% of your benefit withheld from your monthly payments—essentially prepaying a portion of your tax bill. If you're already receiving your benefits and want to start withholding taxes (or change your withholding amount), you'll need to fill out a Form W-4V from the IRS.

You can also opt to make quarterly estimated tax payments or file a tax return by the annual tax-filing deadline. Each method has its pros and cons, so consider your preferences and choose the one that best fits your financial situation.

Is Social Security disability taxable?

Social Security Disability Insurance (SSDI) payments and Social Security retirement benefits differ in several ways, including how they're taxed. Unlike retirement benefits, SSDI payments are generally not subject to federal income tax if they are your only source of income. However, if you have other income sources, such as wages, investment income, or a pension, the SSDI payments may become partially taxable. Your combined income will include half of your SSDI benefits.

SSDI benefits are subject to the same income thresholds as Social Security retirement benefits, as shown in the above chart. It's important to note that state tax laws can vary, and some states may tax SSDI benefits.

Are Social Security survivor benefits taxable?

When it comes to Social Security survivor benefits, the tax rules are similar to those for other Social Security benefits. Since state tax laws can vary, it's a good idea to check your state's rules or consult a tax professional to ensure you're fully prepared.

There are some age-related considerations and other rules for a surviving spouse when it comes to taxes on Social Security survivor benefits. Doing some research can help you make a plan based on your situation.

Federal vs. state Social Security taxes

Social Security benefits can be subject to both federal and state income taxes, but the rules vary. 

Federal taxes on Social Security. At the federal level, if you're a single filer and your combined income is between $25,000 and $34,000, up to 50% of your benefits may be taxable. If your combined income exceeds $34,000, up to 85% of your benefits could be taxable. For married couples filing jointly, the thresholds are $32,000 to $44,000 for up to 50% taxability, and over $44,000 for up to 85% taxability. If Social Security is your only income, you typically won't owe federal income tax on it.

State taxes on Social Security. At the state level, the situation varies based on where you live. While most states don't tax Social Security benefits at all, you may have to pay taxes on Social Security benefits if you live in Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia . Each of these states has its own specific rules and exemptions, so refer to your state's tax code or consult a tax professional to understand how your benefits might be affected.

Who's eligible for Social Security COLAs?

COLA increases are automatically applied to all eligible beneficiaries, including those receiving retirement benefits, disability benefits, and survivor benefits. If you're currently receiving any of these types of Social Security benefits, you're automatically eligible for COLA increases when they're issued. The adjustment is typically announced in October and takes effect the following January. For example, if the CPI-W shows a significant increase, beneficiaries will see a corresponding rise in their monthly payments. This helps to mitigate the impact of inflation and seeks to ensure that the financial support provided by Social Security stays in line with recipients' real-life costs over time.

Social Security beneficiaries saw a 2.5% increase to their 2025 benefits through the most recent COLA. 

Tax-saving strategies for retirement

Social Security is often just one portion of your income in retirement. Planning ahead and coming up with a strategy for your different sources of income can help you minimize your overall tax liability. Consider taking advantage of tax-free withdrawals from Roth IRAs and timing required minimum distributions (RMDs) from traditional IRAs and 401(k) plans. Additionally, maximizing deductions and credits, such as the standard deduction or itemized deductions for medical expenses, can further reduce taxable income.

Roth conversions for tax efficiency

Roth conversions can have a significant impact on how much of your Social Security benefits are taxed. When you convert funds from a traditional IRA to a Roth IRA, the amount converted is considered taxable income in the year of the conversion. This can temporarily increase your income, which might push you into a higher tax bracket or make more of your Social Security benefits taxable. However, the long-term benefits can sometimes outweigh the initial tax hit. Once the funds are in a Roth IRA, any growth is tax-free and you can withdraw them tax-free in retirement,¹ which can help keep your overall tax liability lower in the future.

Is a Roth IRA conversion right for you?

When considering a Roth conversion, it's important to time it strategically. For example, if you expect your income to be lower in a particular year—perhaps due to a gap in employment or a year when you haven't started taking RMDs—it might be a good time to convert. Consulting with a financial advisor can help you navigate the complexities of a Roth conversion and ensure that the conversion aligns with your overall retirement and tax planning goals.

How to convert your Vanguard traditional IRA to a Roth IRA online

Managing taxable withdrawals

If you're looking to optimize your tax strategy in retirement, timing and the type of accounts you draw from can make a big difference in reducing your overall taxable income. One key strategy is to manage your RMDs wisely. RMDs are mandatory withdrawals that start at age 73, and they are taxable. To minimize the tax impact, consider taking only the minimum amount required each year, especially if you have other sources of income that can cover your living expenses.

Another effective approach is to employ a drawdown strategy that minimizes taxes. If you have both traditional and Roth IRAs, you can strategically withdraw from each to stay within a lower tax bracket. For instance, you might take just enough from your traditional IRA to stay below a certain tax threshold and then supplement with tax-free withdrawals from your Roth IRA. This can help you avoid jumping into a higher tax bracket and potentially reduce the amount of your Social Security benefits that are subject to taxes. Always consider consulting with a tax professional to create a strategy for your specific financial situation.

Investment strategies to lower retirement taxes

When planning for a tax-smart retirement, municipal bonds can be a great addition to your investment portfolio. These bonds, issued by state and local governments, offer interest payments that are typically exempt from federal income tax (and sometimes state and local taxes as well). This can be particularly beneficial if you live in a state with high tax rates. By investing in municipal bonds, you can earn income that helps cover your living expenses without increasing your taxable income as much as other types of investments might.

Another tax-smart investment to consider is a tax-managed mutual fund or ETF (exchange-traded fund). These funds are designed to minimize capital gains distributions, which can help keep your taxable income lower. Additionally, holding investments that generate long-term capital gains, which are taxed at a lower rate than ordinary income, can also be a smart move. By diversifying your investments and choosing tax-efficient options, you can create a more tax-friendly retirement income stream that helps you keep more of what you earn.

Depending on the types of investments you hold, and what earnings you receive from them, you'll need to consider the rules around paying taxes on your investment income.