Why is your Social Security taxed, and how much can you save? 5 ways to cut the bill and keep more retirement income

Many American retirees are surprised to find that their Social Security benefits can be taxed. President Donald Trump promised during his campaign to end this tax. What the One Big Beautiful Bill delivered in July 2025 is smaller than that. It gives people aged 65 and above a temporary $6,000 deduction for tax years 2025 to 2028.

A couple gets $12,000 if both spouses are 65 or older. The deduction starts to reduce once income crosses $75,000 for single filers and $150,000 for joint filers. It is also separate from the rule that decides how much of your benefit is taxed. So for most retirees, the tax bill goes down, but it does not go to zero.

When does Social Security become taxable?

The IRS uses a number called provisional income. It is half of your Social Security benefit, plus your other income, plus tax-free interest such as that from municipal bonds.


For a single filer, if this number goes above $25,000, up to 50% of the benefit can be counted as taxable income.

For couples filing jointly, the limit is $32,000. Above $34,000 (single) or $44,000 (joint), up to 85% of the benefit can be counted. This does not mean an 85% tax. It means up to 85% of your benefit gets added to your taxable income and is taxed at your usual rate. These limits are not adjusted for inflation, so more retirees come under them each year.

Roth withdrawals and conversions

Qualified withdrawals from a Roth IRA do not count in provisional income. Withdrawals from a traditional IRA or 401(k) do. If you have both types of accounts, drawing from the Roth first can keep your number lower.

A Roth conversion means moving money from a traditional account into a Roth. You pay tax on the converted amount in that year. The better time to do this is before you start Social Security, when there are no benefits yet for the extra income to affect. Once the money sits in a Roth, later withdrawals will not add to your provisional income.

There are two cautions. People aged 63 and above should note that a large conversion can raise Medicare premiums two years later. A big conversion can also push your income into the range where the new senior deduction starts to shrink. Spreading conversions over a few years is one way to manage this.

Charity, tax-loss harvesting and the municipal bond trap

Required minimum distributions (RMDs) are mandatory withdrawals from retirement accounts. They start at age 73 for those born between 1951 and 1959, and at 75 for those born in 1960 or later. These withdrawals count in provisional income.

One way around this is a qualified charitable distribution (QCD). From age 70½, you can send money directly from your IRA to a registered charity, up to $111,000 in 2026. This can count towards your RMD, and the amount does not show up in your income. QCDs work only with IRAs, not 401(k) plans.

Tax-loss harvesting can also help. If you sell investments at a loss, the loss first cancels any gains you have made. Gains would otherwise add to your provisional income. If losses remain, you can deduct up to $3,000 a year against other income and carry the rest forward.

Municipal bonds need care. Their interest is usually free of federal income tax, but the Social Security formula still adds it to provisional income. A retiree who depends heavily on municipal bond interest can still see part of the benefit taxed.