Many retirees rely on Social Security as a core part of their income, which means tax changes can have a meaningful effect on their monthly budget. With 2026 right around the corner, understanding how your benefits could be taxed is more important than ever. Planning ahead allows you to adjust your income sources, reduce your tax liability, and maximize your senior benefits. Even small changes in taxable income can affect how much of your Social Security is subject to tax.

Here is what retirees need to know before 2026 rolls around.

How Social Security benefits are taxed

Social Security benefits are not always fully tax-free — it depends on your other income. The IRS uses a formula that calculates your combined income, which includes your adjusted gross income (AGI), nontaxable interest, and half of your annual Social Security benefits.

The higher your combined income, the more likely it is that a portion of your benefits will be taxed. Currently, up to 85% of your Social Security income can be taxed at the federal level if you exceed specific IRS thresholds.

IRS Social Security tax thresholds explained

The IRS determines whether your benefits are taxable based on your filing status and combined income. Retirees may be surprised to learn that their benefits are taxable at all.

Below is an easy-to-read version of the federal rules, so you can get a better understanding:

For single filers, heads of household, or qualifying widow(er)s:

• Combined income $25,000 or less → Social Security benefits are not taxed.
• Combined income $25,000 to $34,000 → Up to 50% of benefits may be taxable.
• Combined income above $34,000 → Up to 85% of benefits may be taxable.

For married couples filing jointly:

• Combined income $32,000 or less → Benefits are not taxed.
• Combined income $32,000 to $44,000 → Up to 50% of benefits may be taxable.
• Combined income above $44,000 → Up to 85% may be taxable.

Some states may tax Social Security benefits

While federal rules determine whether your benefits are taxed nationally, each state can decide whether to tax Social Security income at the state level. Most states do not tax Social Security at all, but a handful still do: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia (although West Virginia will eliminate this tax entirely in 2026).

Understanding your state’s rules matters because state taxes can reduce your retirement income, even if you owe little to no federal taxes. Always review your state’s tax code carefully or speak with a tax professional before filing.

Why the Social Security tax thresholds matter

Because the IRS income thresholds have not been adjusted for inflation recently, more retirees could be hitting taxable ranges each year. Rising wages, increased retirement account withdrawals, and growing investment income can push combined income higher.

Once you cross a threshold, the percentage of your benefits subject to tax can jump significantly. It’s crucial to track your income totals throughout the year, especially for retirees with additional taxable income.

Steps to take to keep more of your Social Security benefits

Retirees can take proactive steps to reduce how much of their Social Security is taxed. Managing your combined income — especially IRA withdrawals and part-time earnings, for example — may help keep you below key IRS thresholds. You can also structure retirement income sources strategically to minimize taxable income.

Move to a state that doesn’t tax Social Security benefits

Relocating may make a sizable difference in your retirement budget since the majority of states exempt Social Security from income taxes. Moving to a tax-friendly state may help you preserve more of your federal and state income.

Beyond Social Security, some states may have more favorable tax treatment for retirement income overall. Before making a decision, compare expenses such as cost-of-living differences, healthcare access, and property taxes to ensure the move makes financial sense.

Don’t earn more than the IRS limits

Keeping your combined income within federal thresholds helps minimize the taxable portion of your benefits. This may involve reducing part-time work hours, strategically coordinating withdrawals from retirement accounts, or spacing out investment income.

Managing required minimum distributions (RMDs) is also important, as larger withdrawals could unintentionally push you into the 85% bracket. A financial planner can help you build a withdrawal strategy that aligns with your retirement income needs.

Bottom line

Understanding how Social Security taxation works can help you protect more of your retirement income. Reviewing both federal and state rules allows you to make smarter decisions about where you choose to live and how you structure your income throughout your golden years.

By planning ahead and keeping your income within key IRS thresholds, you can build a retirement plan that helps maximize your Social Security and maintain long-term financial stability.