Social Security benefits are a valuable source of retirement income, and no one wants to lose them to taxes.
Unfortunately, some retirees end themselves owing money to both the IRS and their state or local government.
On the federal level, you’ll be taxed on up to 50% of your benefits if your provisional income exceeds $25,000 for single filers and $32,000 for married joint filers, or up to 85% if your provisional income exceeds $34,000 or $44,000, depending on your filing status. Provisional income is half of your benefits plus your adjusted gross income (AGI) + nontaxable interest.
On the state level, however, the rules differ. Nine states provide tax benefits, whereas 41 do not. If you live in one of these areas, you may need to make some arrangements to avoid owing money to the government.
Here are the nine states that tax Social Security benefits in 2025:
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Colorado
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Connecticut
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Minnesota
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Montana
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New Mexico
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Rhode Island
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Utah
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Vermont
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West Virginia
If your state is on the list, it is not guaranteed that you will have to pay taxes on your benefits. It depends on your income, as most states do not tax you unless you make more than a certain amount. For example, in Connecticut, you are exempt unless your AGI exceeds $75,000 for single filers or $100,000 for married joint filers.
Contact your state’s revenue department to confirm the criteria. If you are going to owe money, there are a few things you may do to reduce your tax bill – or possibly avoid paying altogether.
Consider performing a Roth conversion.
Withdrawals from traditional retirement plans, such as a 401(k) or an individual retirement account (IRA), are used to determine whether you will be taxed on your benefits. Roth distributions, on the other hand, are tax-free and do not count toward the threshold.
Just keep in mind that a Roth conversion — transferring retirement assets such as those mentioned above or, say, a simplified employee pension (SEP) into a Roth IRA — is a taxable event, and you may not be able to take advantage of tax-free Roth withdrawals for at least five years after your conversion, so you should consult with a tax professional before making this decision.
Be strategic in your timing.
You will not owe money if you can keep your income below the limit when benefits become taxable. There are several options for doing so, including deferring your Social Security claim and withdrawing more from your funds early on.
If you withdraw funds from your investment accounts sooner, you will not have to withdraw as much money when you reach the age of 73 and must begin taking required minimum distributions. This makes it easy to keep within the exemption guidelines.
You’ll also receive more Social Security payments for each month you wait until age 70, resulting in a higher amount of retirement income from that source when you eventually claim benefits. Larger Social Security payouts in the future can assist ensure you have enough money to cover lower investment withdrawals at that time.
Just be sure you don’t withdraw so much from your accounts early in retirement that you run out of money. Working with an accountant or financial planner to determine a safe withdrawal rate and the best technique for minimizing taxes is essential.
Maximize your philanthropic gift.
Finally, you can make charitable contributions to lessen your income and avoid paying Social Security taxes by staying below your state’s exemption threshold.
You may even be able to contribute your RMD directly, but you must meet specific criteria to be eligible under the qualified charitable distribution regulation. These restrictions include being 70 and a half or older, donating less than $108,000 (up from $105,000 for the 2024 tax year), and having the IRA distribution paid directly to the charity.
Final Words
By considering these choices, you may be able to reduce or even avoid paying Social Security taxes altogether. Of course, you can move to one of the 41 states that do not tax those benefits, but relocating solely to save on taxes may not be the greatest approach to plan your retirement years.
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