Seven Ways to Reduce Taxes on Social Security Benefits in 2025

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Many retirees face an unexpected challenge each year: minimizing taxes on their hard-earned Social Security benefits. While these benefits provide essential income for millions of older adults, they can also result in a surprising tax burden. That's because depending on your income, up to 85% of your Social Security benefits may be subject to federal tax.

It's estimated that roughly 56% of families receiving subsidies will have to pay federal income taxes on those benefits through 2050.

over ten years.

Considering the uncertainty about potential tax changes, retirees should concentrate on strategies they can manage to reduce taxes on their Social Security benefits. Here are seven to get you started.

Related: Check out 's Tax blog for the 2025 tax filing season We're offering real-time updates, news, information, and analysis to assist you with your taxes.

6. "If you're receiving Social Security benefits and also working, you may be able to deduct a portion of your self-employment tax as business expenses, which could reduce the amount of taxes owed

It's a good idea to remember that the part of your benefits that may be taxable will depend on your income before we explore ways to reduce your tax burden.

You may be able to deduct a portion of your investment income, including nontaxable interest and half of your Social Security benefits from the year.

For more information, see Calculating Taxes on Social Security Benefits.

The benefits you receive from Social Security are not affected by your age, but rather by the amount of taxable income you have.

It's also important to remember that each retiree's situation is distinct, and what works for one person may not be the best fit for another. Considerations such as overall retirement savings, other income sources, and personal financial objectives can help determine the most suitable approach for you.

Should You Delay Taking Social Security Until Age 70?

in retirement.

However, delaying benefits requires having enough alternative income sources during the delay period for some, and it also means giving up years of potential benefit payments.

2. Take advantage of Roth IRA rules

It's a good idea to transfer money from a 401(k) fund to a Roth account before you start receiving Social Security benefits.

Having sufficient cash reserves can impact your eligibility for certain tax benefits, and it's also essential to have enough money to cover any resulting tax obligations.

3. Manage investments

These exempt mutual funds may offer lower yields, but they can help keep your taxable income down, potentially reducing the amount of your Social Security benefits subject to taxes.

However, investments that optimize tax returns could lead to slower overall portfolio growth, which might not fully compensate for the tax benefits for some investors.

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Some experts recommend repositioning some of your assets if you're close to the Social Security income threshold and don't rely on that income for your daily living expenses.

4. Using losses to offset gains

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While tax-loss harvesting can provide immediate tax benefits for retirees, it may result in larger capital gains and potential tax liabilities in the long run.

5. Time withdrawals strategically

(RMDs) can help spread out your tax burden over several years, possibly keeping you in a lower tax bracket and ultimately reducing your total lifetime tax bill.

However, there's a potential drawback to consider: This might exhaust retirement savings sooner than planned, which could reduce the benefits of long-term tax-deferred growth.

Before making a QCD, it's a good idea to consult with your financial advisor

Philanthropic donations can have a double benefit by assisting causes you are passionate about while possibly reducing your tax liability.

You can take (QCDs) directly from your IRA. These distributions meet your RMDs without increasing your taxable income.

A disadvantage of this approach is that it can decrease the total funds available for personal use in retirement.

Consider a state with no personal income tax.

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However, exemptions and deductions can lower or completely eliminate this tax even in those states.

If you're thinking about moving to a new place in retirement due to tax considerations:

• Some states offer substantial exemptions or are gradually eliminating taxes on Social Security.
• When evaluating potential relocation options, take into account property taxes, other state income taxes, and fees.

Will there be an end to taxes on Social Security in the near future?

The Tax Cuts and Jobs Act, also referred to as the Trump tax cuts, are scheduled to expire at the end of this year.

Along with other tax-cut proposals, such a significant change to Social Security taxes would require major legislative action and could impact the program's funding and the federal budget. This might necessitate compromises, potentially meaning taxes on Social Security remain in place.

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It can help you make the most of your Social Security benefits.

Related Content

• Taxes on Social Security: Five Key Facts to Understand
• Will Retirees Stop Paying Taxes on Social Security Benefits Next Year?
• Calculating Taxes on Your Social Security Benefits
• Can President Trump eliminate taxes on Social Security?