This will be a big challenge for you to keep most of your Social Security benefits after this new tax bill called “Big Bill” For you, there are many options available to reduce your taxes on Social Security.
If you plan properly and make some smart decisions, you can cut down your taxes and keep the most of your Social Security benefits.
Understanding Taxes on Social Security benefits
Your first step will be understand the tax on your benefit. Your taxes depends on the amount of your total income. Which includes:
- Your Social Security benefits
- Withdrawals of your pension or retirement savings
- Any other income from job or self employment
- Your earnings through investments
In U.S. the IRS calculate your taxes on your combine income which includes your total income and the income from Social Security.
For the individuals, if your income is $25000 to $34000, your 50% of your benefits can be taxable. And if the income if more than $34000, the taxable part can be 85% of your total benefits.
And for the married couple the limit is $32000 to $44000. If your combined income is more than $44000 your 85% of the benefits can be taxable.
You can use your Roth Accounts for your benefits
Another way to save your taxes is by using your Roth Retirement Accounts (Roth IRA).
- Roth IRA: In this Roth IRA, you do not need to pay taxes on your withdrawals because you already paid in advance. So your income will not be count as your taxable income and you can reduce your taxes.
- 401(K): The 401(k) is also the same as the Roth IRA, there is no tax liability on the withdrawals in 401(k). This is a way, you can decrease your taxable income and save taxes on your Social Security.
Delay your benefits claim
This option is to available for everyone, but it will help you to reduce taxes on your benefits.
When you delay your claim after your Full Retirement Age, your monthly benefits can be increased by 8% and even more each year before the age of 70.
If you have other source of incomes, this can help you to reduce your taxable income. This will help you to reduce the tax on Social Security.
Use the Advantage of the Standard Deduction for Senior
In the United States, a senior can receive an tax benefit as the Standard Deduction for senior in 2025. The deduction limits are:
- For individuals the amount is $6000
- For the married people the amount is $12000
The Standard Deductions for seniors can help you to reduce your taxable income and it will also reduce the taxes on your Social Security benefits.
You can reduce your Income from Other Sources
You need to limit your total taxable income for reduce the tax burden on your your Social Security.
For those who have retirement accounts like IRA, 401(k) etc. You need to try to withdraw your money in a efficient way so that you can keep your taxable income as much low as possible. In this way, you can stop yourself to fall in higher tax catagory.
If you are selling your investments, please keep the capital gain in your control. Any large gain from your investment can make your taxable income higher. You can hold your investments to keep your income under the threshold limit.
States Taxes on Social Security
In the United States, some of the states also impose taxes on your benefits along with the federal government. Right now in the U.S., only 12 states tax on your benefits. If your state is one of them, you need to pay more taxes than the people who live in the other states.
You need to have proper planning to reduce taxes on your benefits. You can use Roth accounts, 401(k), claim your benefits late, reduce the income from other source to cut down the taxes. You can use the Standard Deduction for senior to reduce your tax burden.
For more, you can consult to a financial advisor or a tax professional for better understanding. They can prepare you personalized tax plan and strategy which can be helpful for you to reduce your taxes on Social Security benefits.
You can visit the official website of Social Security Administration (SSA) for more information.
