7 Ways to Reduce Taxes on Social Security Benefits in 2025

Many retirees are caught off guard when they realize that their Social Security benefits can be taxed. These benefits are meant to provide financial support, but depending on your income, a portion of them could be subject to federal taxes. In fact, up to 85% of your Social Security benefits may be taxed if you cross certain income thresholds.

For single filers, taxes on Social Security kick in when your combined income exceeds $25,000. If you’re married and filing jointly, the threshold is $32,000. Projections from the Social Security Administration suggest that by 2050, about 56% of beneficiary families will owe federal income tax on their benefits.

Although some lawmakers have proposed eliminating these taxes, those changes are uncertain and would require major legislative action. Meanwhile, retirees should focus on strategies within their control to reduce the tax burden on their Social Security benefits. Here are seven ways to do just that.

1. Delay Taking Social Security Until Age 70

One way to potentially lower your taxes is by waiting until age 70 to claim your Social Security benefits. By doing this, you increase your monthly payout, which can give you more financial flexibility. Plus, it allows you to manage your taxable income better in your earlier retirement years.

However, delaying benefits isn’t ideal for everyone. If you don’t have other income sources to cover your living expenses, waiting might not be an option. Also, many recipients wonder about the exact Social Security payment dates for March 2025, ensuring they can plan their expenses accordingly.

2. Use Roth Accounts to Your Advantage

Roth IRAs and Roth 401(k)s can be great tools for minimizing taxes in retirement. Unlike traditional retirement accounts, withdrawals from Roth accounts are tax-free, which means they won’t add to your taxable income. This can help keep your Social Security benefits from being taxed.

A downside to this strategy is that converting traditional IRA or 401(k) funds to a Roth account comes with an upfront tax cost. You’ll need to ensure you have enough cash available to cover the tax bill without dipping into your retirement savings too much.

3. Invest in Tax-Efficient Options

The types of investments you hold can affect your tax situation. Some retirees shift part of their portfolio to tax-efficient investments like municipal bonds or tax-exempt mutual funds. These options might have lower returns, but they can help keep your taxable income lower, reducing how much of your Social Security benefits get taxed.

On the flip side, investments that generate a lot of dividends, interest, or capital gains could increase your taxable income, making more of your Social Security subject to tax. If you’re nearing the taxable income threshold, it may be wise to adjust your portfolio accordingly.

4. Offset Capital Gains with Losses

Tax-loss harvesting is a strategy that allows you to sell investments at a loss to offset taxable capital gains. By lowering your adjusted gross income, you may also keep your Social Security benefits from being taxed.

Keep in mind that losses can offset gains and up to $3,000 of ordinary income per year. However, tax-loss harvesting applies only to taxable accounts, and you must follow IRS rules to avoid triggering a wash-sale penalty.

5. Withdraw from Retirement Accounts Strategically

Taking withdrawals from your retirement accounts before reaching the age for required minimum distributions (RMDs) can help spread out your tax burden. By withdrawing smaller amounts over several years, you might be able to stay in a lower tax bracket and reduce overall taxes in the long run.

The downside is that taking withdrawals early could mean depleting your savings sooner than necessary. Carefully balancing your withdrawals is key to making this strategy work.

6. Make a Qualified Charitable Distribution (QCD)

If you’re 70½ or older, you can donate directly from your IRA to a qualified charity through a Qualified Charitable Distribution (QCD). These donations count toward your required minimum distributions (RMDs) but don’t increase your taxable income.

While this is a great way to support a cause you care about while lowering your taxes, it also means you’ll have less money available for personal use in retirement.

7. Consider Moving to a Tax-Friendly State

Some states tax Social Security benefits, while others don’t. As of 2025, the following states still tax Social Security:

If you live in one of these states, you may want to consider moving to a state with no Social Security tax. However, you should also take into account property taxes, sales taxes, and other living costs before making a decision.

Will Taxes on Social Security Benefits Ever Be Eliminated?

There have been discussions about removing taxes on Social Security, especially since certain tax laws are set to expire soon. Some lawmakers have proposed eliminating these taxes, but any change would require significant legislative approval.

Until then, retirees should focus on strategies they can control to minimize their tax burden. Working with a financial advisor or tax professional can help you find the best approach based on your unique situation.

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FAQs on Reduce Taxes on Social Security Benefits

At what age do Social Security benefits stop being taxed?

There is no specific age when Social Security benefits stop being taxed. It depends on your income level, not your age.

How do I know if my Social Security benefits will be taxed?

Your benefits may be taxed if your combined income exceeds $25,000 as a single filer or $32,000 if married and filing jointly.

Can I avoid paying taxes on Social Security benefits completely?

While it’s difficult to eliminate taxes on Social Security entirely, strategies like managing your investments, using Roth accounts, and making charitable donations can help reduce the amount you owe.