Many retirees are surprised to learn that Social Security can be taxed at all — and even more surprised to find that a modest IRA withdrawal can raise their tax bill far more than their bracket suggests. The reason is a formula that has not changed in decades and that pulls more of your benefit into taxable income as your other income rises. Understanding it is the key to choosing which retirement account to draw from.
This is general information, not individual tax advice — the right treatment depends on your specific situation.
When Social Security Becomes Taxable
The IRS looks at your provisional income: your adjusted gross income (not counting Social Security), plus any tax-exempt interest, plus half of your Social Security benefits. Then:
Below $25,000 (single) or $32,000 (married filing jointly), none of your benefits are taxed. Above those amounts, up to 50% of benefits can be taxable. Above $34,000 (single) or $44,000 (joint), up to 85% can be taxable. No one pays tax on more than 85% of their benefits — but because these thresholds have never been adjusted for inflation, more retirees cross them every year.
The “Tax Torpedo”: Why One IRA Dollar Can Count Twice
Once you are in the 85% zone, each extra dollar of other income can also make up to 85 cents of Social Security taxable. Take a single retiree with $30,000 of Social Security and $20,000 of traditional IRA withdrawals. Their provisional income is $35,000, and about $5,350 of their benefits is taxable. If they withdraw one more $1,000, about $850 more of their Social Security becomes taxable as well — so that $1,000 adds roughly $1,850 of taxable income.
In effect, the withdrawal is taxed at nearly double their bracket rate until the 85% cap is reached. Many retirees in this range pay a higher marginal rate than they did while working without ever realizing it.
Which Withdrawals Count — and Which Don't
Not all retirement money feeds the formula equally. Every dollar from a traditional IRA or 401(k) counts in full. Qualified Roth withdrawals don't count at all, which makes a Roth the most useful lever for keeping Social Security taxes down. From a taxable brokerage account, only the gain counts, not the money you originally invested. And note the trap: municipal bond interest, though tax-free itself, is added back into provisional income.
That is why the order you draw from your accounts matters. Our guide to tax-efficient retirement withdrawals covers how to blend them year by year.
Required Distributions and the Charitable Workaround
Required minimum distributions (RMDs) begin at 73, or 75 for anyone born in 1960 or later, and they are forced income whether you need the money or not — often enough to push more of your benefits into the 85% zone. If you give to charity, a qualified charitable distribution (QCD) from an IRA, available from age 70½, counts toward your RMD but is left out of your income entirely. The 2026 limit is $111,000 per person.
Roth Conversions: Pay Some Tax Now to Shrink It Later
Converting traditional IRA money to a Roth is taxable in the year you convert, and a conversion can't be undone. But it shrinks future RMDs and builds a pool of withdrawals that never touch the Social Security formula. The best time is usually before you claim benefits and before RMDs start, converting in slices that fill a low bracket. Once you are collecting, model the conversion first — it can raise the taxable share of your benefits that year. We cover the timing in the tax moves to make at 50.
Two More Thresholds to Watch
The new senior deduction. For 2025 through 2028, people aged 65 and older can deduct up to an extra $6,000 each, whether or not they itemize. It phases out once modified AGI passes $75,000 (single) or $150,000 (joint), so a large withdrawal can cost part of this deduction too.
Medicare surcharges (IRMAA). Part B and Part D premiums rise for higher incomes, based on your tax return from two years earlier. For 2026 premiums, the first surcharge starts above $109,000 (single) or $218,000 (joint) of 2024 income — and each tier is a cliff.
Still Working While Collecting?
You can keep contributing to an IRA or workplace plan as long as you have earned income — wages or self-employment, not Social Security or investment income — and there is no longer an age limit on traditional IRA contributions. If you claimed before full retirement age, Social Security withholds $1 for every $2 you earn above $24,480 in 2026; those benefits aren't lost, and your payment is recalculated upward once you reach full retirement age.
How VarStan Helps
We model your Social Security, withdrawals, RMDs and conversions across several years so you can see which dollar to spend first and what each choice really costs. If you are collecting benefits — or about to — and want to know whether you are in the tax torpedo zone, start with a conversation.
Related reading: Your Spouse Died Owing the IRS: Are You on the Hook? and The Education Freedom Tax Credit: A Dollar-for-Dollar Credit for Giving.