Seniors often pay taxes on up to 85% of their Social Security benefits based on “combined income.” With recent legislative changes, there are strategic ways to reduce or eliminate that tax in your 2025 and 2026 filings. This guide dives into key tactics and planning moves.
📊 1. Understand Combined Income Thresholds (2025)
The IRS determines taxable Social Security using “combined income” = AGI + tax-exempt interest + ½ Social Security. The 2025 thresholds remain:
- Under $25K (single) / $32K (joint): 0% taxable
- $25K–$34K (single) / $32K–$44K (joint): up to 50% taxable
- Above $34K (single) / $44K (joint): up to 85% taxable :contentReference[oaicite:1]{index=1}
🧩 2. Maximize the OBBBA “Senior Deduction”
The One Big Beautiful Bill Act (OBBBA) launched in 2025 provides seniors 65+ with a deduction up to $6K (singles) or $12K (couples), phasing out between MAGI $75K–$175K (single) and $150K–$250K (joint) :contentReference[oaicite:2]{index=2}. This can directly offset taxable Social Security income, potentially wiping out tax liability for many.
🔄 3. Use Roth Conversions to Reduce AGI
Converting traditional IRAs/401(k)s to Roth accounts raises current taxable income but reduces future taxable withdrawals—and lowers future AGI. A lower AGI keeps combined income beneath thresholds and reduces taxable Social Security :contentReference[oaicite:3]{index=3}.
⏳ 4. Delay Claiming Social Security Benefits
Postponing benefits until age 70 increases monthly payouts and allows use of other assets to delay income. This often keeps AGI and combined income below taxable thresholds in earlier years :contentReference[oaicite:4]{index=4}.
🏦 5. Reduce Tax‑Exempt Income
Because combined income includes nontaxable interest, reduce municipal bond holdings or time withdrawals so tax-exempt income doesn’t push you into a higher Social Security tax bracket.
🗓 6. Plan Timing of Income Events
- Strategic Roth conversions: Spread conversions during low-income years to avoid pushing combined income over thresholds.
- Delay RMDs: If you’re required to take RMDs, deferring Roth conversions or selling assets in a coordinated way can reduce combined income.
- Avoid lump-sum income: Large taxable events in one year (e.g., capital gains) may push benefits into the taxable zone.
📐 7. Estimate Taxable Portion
Calculate your projected AGI and combine with half your benefits to see your “provisional income.” Compare to IRS thresholds to estimate taxable portion (50% or 85%).
📋 8. Example Scenarios
Example A: Single retiree, $24K AGI + $24K Social Security = Combined $36K → 85% benefits taxable. But $6K senior deduction reduces AGI to $18K for tax purposes → combined falls to $30K → only 50% taxable.
Example B: Couple: $40K AGI, $30K SS → combined = $55K → 85% taxable. Roth conversion avoids $10K AGI boost. Delayed RMDs save them $3–4K in taxable Social Security.
💡 9. Consider State Taxes
Some states tax Social Security benefits with specific AGI thresholds (e.g., Minnesota, Connecticut, Rhode Island). Staying below those can eliminate state tax too :contentReference[oaicite:5]{index=5}.
⚠️ 10. Monitor Legislative Changes
The OBBBA deduction is temporary, through 2028. State rules and thresholds may also shift—stay informed to adjust your strategy :contentReference[oaicite:6]{index=6}.
🛠 11. Action Checklist
- Estimate AGI, tax-exempt income, and ½ SS to find combined income.
- Run a Roth conversion “gap year” analysis on traditional/IRA funds.
- Delay SS if it helps keep combined income low.
- Apply the full senior deduction if AGI under phase-out levels.
- Coordinate RMDs, Roth conversions, and asset sales across years.
- Review state-specific exemptions.
- Reevaluate strategy annually as thresholds and benefit amounts change.
✅ Final Takeaway
Lowering tax on Social Security for your 2025 and 2026 returns requires planning: reduce AGI, leverage the new OBBBA senior deduction, consider Roth conversions, and time your income wisely. Done correctly, it can bring your taxable portion to zero—maximizing your retirement income while minimizing tax.
