If you’re collecting Social Security benefits, there’s a good chance your tax bill could be higher than in previous years. With the expiration of key tax provisions and more retirees entering higher income brackets, understanding how to reduce taxes on Social Security is more important than ever.
Social Security benefits are taxed based on your provisional income, or rather a combination of your adjusted gross income, tax-exempt interest, and half of your Social Security benefits. If your income exceeds certain thresholds, up to 85% of your benefits may be taxable.
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Fortunately, there are legal and strategic ways to lower your taxable income and keep more of your retirement money.
Quick Take: What Will Social Security Taxes Look Like in 2026?
Social Security taxes are a hot-button issue both economically and politically. Hopefully, 2026 brings achieved resolutions and better economic conditions. For Social Security taxes, you’ll want to add a few notes to your retirement planning when it comes to filing for the tax year 2025:
The Social Security tax rate will remain 6.2% for employees, with employers paying a matching 6.2% (a total of 12.4%). Self-employed individuals pay the full 12.4%, though they can deduct the employer-equivalent portion.
The maximum amount of gross earnings subject to the Social Security tax is $176,100. Earnings above this limit are not subject to the Social Security portion of the payroll tax. Also, the maximum Social Security tax an employee will pay in 2025 is $10,918.20 (6.2% of $176,100).
The Medicare tax rate remains at 1.45% each for the employee and employer, and there is no wage base limit for Medicare tax; all covered wages are subject to it.
Taking effect in 2026, there will be a new tax-free deduction of up to $6,000 for those 65 and older.
Provisional income is determined by adding the combined total of half of your Social Security benefits, your tax-exempt interest, and other non-Social Security items (such as jobs or investments) that make up your adjusted gross income.
According to the Social Security Administration, starting this year, there will be a tax on Social Security benefits similar to private pension income. There will be a phase-out of the lower-income thresholds between 2025 and 2044.
Taxation of Old-Age, Survivors, and Disability Insurance (OASDI) benefits will also increase to $50,000 for single filers and $100,000 for joint filers starting in 2026.
So what can you do to lower your Social Security tax liability in the future? Here are a few tips.
1. Start Retirement Planning Early
A good first step is to start planning now if you haven’t yet. Think about the income sources you can expect over the next five to 10 years, and how those sources might impact your provisional income thresholds. Simply put, early retirement planning is the key.
For example, one way to lower your tax bill is to opt for a qualified charitable distribution, or QCD, which lets you give your required minimum distributions to charity. QCDs are excluded from taxable income when you donate your required minimum distribution.
2. Convert Your Retirement Savings to Roth Accounts
Another option is to convert your retirement savings to Roth accounts. Withdrawals from Roth 401(k) plans or IRAs aren’t considered part of provisional income calculations. Before you make a conversion, however, it’s a good idea to consult with a qualified financial planner or tax preparer who can determine how much can be converted without pushing you into a higher tax bracket.
You can also move income-generating assets into a Roth IRA. This way, the interest or dividends won’t count immediately as income. You don’t necessarily need to put new money into this account for your plan to work, either. You can sell income-producing assets as a tax-advantaged shelter in an IRA.
3. Minimize Withdrawals From Your Retirement Plans
Think of your withdrawals as income. That’s how they are taxed because anything you pull from a 401(k) account or Roth IRA will increase your adjusted gross income. By reducing the amount you withdraw from your account, or not taking any out at all, you get yourself closer to the tax-free threshold.
4. Tax-Loss Harvesting
While you’re minimizing your withdrawals, you should also make sure to take your maximum capital loss. For example, instead of selling stocks and bonds that you have invested in that have shown a loss, you can claim this loss as a tax deduction, also known as tax-loss harvesting.
This deduction can be substantial, and the tax code allows you to write off up to a net $3,000 each year in investment losses. Though any net loss beyond this amount can be carried through to be used in future years, the full value of the net loss could push your Social Security payments into the tax-free area, which can be a good assist for your retirement income.
Vance Cariaga contributed to the reporting for this article.
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This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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