If this article's headline piqued your curiosity, I won't keep you in suspense. You need to read this article if your Social Security benefit is above $25,000 if you're a single tax filer. If you file taxes jointly with your spouse, the magic number rises to $32,000.
Why should you continue reading? Because you could have to pay taxes if your benefits are at those levels -- and this article will give you tips on how you might lower how much you have to pay.
If your Social Security benefit is lower than these thresholds, should you stop reading now? Nope. I'll explain why.
Image source: Getty Images.
Social Security tax thresholds
Those thresholds of $25,000 and $32,000 actually aren't for Social Security benefits. Instead, your benefit amount is used in a formula that the IRS uses to determine if you owe taxes on your Social Security benefits. This formula is:
Combined income = Adjusted gross income (AGI) + nontaxable interest + 50% of your Social Security benefit
If your only source of income is Social Security, your combined income will be based solely on your Social Security benefits. However, many Social Security beneficiaries receive other income (for example, from pensions, IRAs, or 401(k) accounts).
The following table shows the tax thresholds the IRS uses to determine how much to tax your Social Security benefits:
| Filing Status | Combined Income | Maximum Portion of Benefits Subject to Tax |
| Single Individual | Under $25,000 | 0% |
| $25,000 to $34,000 | Up to 50% | |
| Over $34,000 | Up to 85% | |
| Married Filing Jointly | Under $32,000 | 0% |
| $32,000 to $44,000 | Up to 50% | |
| Over $44,000 | Up to 85% |
Data source: Social Security Administration.
Actions you can take
The key to reducing taxes on your Social Security benefits is to lower your combined income. The following are some actions you might be able to take to achieve this goal:
- Prioritize withdrawals from Roth accounts. Because any money withdrawn from Roth IRAs and Roth 401(k) plans isn't taxable, increasing your income from these sources will lower your AGI.
- Use Qualified Charitable Distributions (QCDs). The IRS allows you to contribute to charities directly from your tax-deferred IRAs and count them toward your Required Minimum Distributions (RMDs). The age threshold for RMDs is currently 73 but will rise to 75 by 2033. Using QCDs, therefore, lowers your AGI and combined income.
- Use strategic tax-loss harvesting. If you sell underperforming investments at a loss, you can potentially offset capital gains on profitable investments. Taking this step will help reduce your AGI and combined income.
By the way, even if your Social Security benefits currently aren't taxed, you might want to keep these approaches in mind. Each year, the annual Social Security cost-of-living adjustments (COLAs) push your benefits and combined income higher. However, the tax thresholds don't change.
