Best Ways to Minimize Taxes on Your Social Security Benefits

March 12, 2024 — The vast majority of people for whom Social Security is their only source of income generally won’t pay any taxes on their benefits. But it might come as a surprise to others that their Social Security benefits could count as taxable income. People with enough revenue from pensions, savings, Required Minimum Distributions, etc., might have to pay income taxes on up to 85% of their benefits. 

How are Social Security benefits taxed?

The law was changed in 1983 to help improve the stability of Social Security. After that, lower earners continued to get a break on their taxes, but higher earners now had to pay some taxes on their benefits. Over time the brackets have not expanded along with inflation, so an estimated 50% of people now pay some tax on their benefits. SS uses an adjusted gross income formula (earnings, investment income, retirement saving withdrawals and other taxable income, non taxable interest, and one half of Social Security benefits to determine what taxes might have to be paid.