How to Keep Your Social Security Benefits Untaxed

Social Security is a source of income for many retirees, but these benefits are not always exempt from federal income tax. The taxability of your benefits depends on your other income, and understanding this calculation is part of managing your retirement finances to minimize your tax burden.

Calculating Your Provisional Income

The key to determining if your Social Security benefits are taxable lies in a figure called “provisional income.” The Internal Revenue Service (IRS) uses a formula to calculate this amount: your Adjusted Gross Income (AGI) plus any nontaxable interest, plus one-half of the total Social Security benefits you received for the year.

Your AGI is your gross income minus certain above-the-line deductions. Common sources of income included in AGI are wages, self-employment earnings, pension payments, and distributions from traditional 401(k)s and IRAs. Nontaxable interest typically comes from municipal bonds.

For example, consider a married couple filing jointly with an AGI of $30,000. They also have $2,000 in nontaxable interest and received $20,000 in Social Security benefits. Their provisional income would be calculated as $30,000 (AGI) + $2,000 (nontaxable interest) + $10,000 (half of their Social Security benefits), for a total of $42,000.

Federal Income Thresholds and Reporting

Once you have calculated your provisional income, you must compare it to the federal income thresholds. These thresholds vary based on your tax filing status. The income brackets are not indexed for inflation, so they have remained the same for many years, causing more beneficiaries to pay tax on their benefits over time.

For individuals filing as single, head of household, or qualifying widow(er), if your provisional income is below $25,000, your benefits are not taxed. If your income is between $25,000 and $34,000, up to 50% of your benefits may be taxable. For income exceeding $34,000, up to 85% of your benefits could be subject to tax. For those married and filing jointly, no tax is due on benefits if provisional income is under $32,000, and up to 50% is taxable for income between $32,000 and $44,000, and up to 85% is taxable for income above $44,000.

You will need Form SSA-1099, the Social Security Benefit Statement, which is mailed to you each January. This form details the total benefits you received during the previous year. After determining the taxable portion of your benefits, you report this amount on your Form 1040. If you anticipate that your benefits will be taxed, you can request voluntary tax withholding by submitting Form W-4V to the Social Security Administration.

Strategies to Keep Social Security Benefits Tax-Free

Managing your provisional income is the most effective way to reduce taxes on your Social Security benefits. This requires planning around the sources of your retirement income. Distributions from traditional IRAs and 401(k)s increase your AGI and provisional income. In contrast, qualified distributions from a Roth IRA or Roth 401(k) are tax-free and are not included in your AGI, which means they do not affect the taxability of your Social Security benefits.

Another strategy involves the timing of income. If you have investments such as stocks or mutual funds in a taxable brokerage account, you can strategically sell them. By realizing long-term capital gains in years when your other income is lower, you can stay below the provisional income thresholds and avoid a large spike in AGI.

For retirees over age 70 ½, a Qualified Charitable Distribution (QCD) offers a useful tool. A QCD allows you to donate up to $108,000 in 2025 directly from your traditional IRA to a qualified charity. The amount of the QCD is excluded from your AGI, which can help lower your provisional income. This strategy is useful for those who must take Required Minimum Distributions (RMDs), as the QCD can satisfy all or part of their RMD obligation.

How States Tax Social Security Benefits

The taxation of Social Security benefits at the state level is entirely separate from federal rules. State laws on this matter differ significantly across the country. It is important to understand your specific state’s approach, as it can have a meaningful impact on your overall tax liability.

States generally fall into one of three categories regarding the taxation of Social Security. A majority of states do not tax Social Security benefits at all, providing a full exemption regardless of a retiree’s income level.

A smaller group of states do tax Social Security benefits, often by linking their rules to the federal calculation. A third group of states has its own unique set of rules, which may include different income thresholds or age-based exemptions. Because these rules can change, you should consult your state’s department of revenue for the most current information.