Taxes on Social Security Are Based on Your Income

Major tax and spending legislation enacted in July 2025 established a deduction of up to up to $6,000 for millions of taxpayers 65 and older. The special deduction, effective through 2028, does not change how Social Security benefits are taxed; however, it can reduce taxable income and taxes due on Social Security benefits.

You can have taxes withheld from Social Security

If you’re worried about paying a big bill to the IRS, you shouldn’t wait to send a year’s worth of income taxes all at once. You can have a percentage withheld from your monthly Social Security benefit.

You can start withholding when you apply for Social Security, or do so later by filling out IRS Form W-4V and submitting it to a Social Security office. You can choose to have 7 percent, 10 percent, 12 percent or 22 percent of your benefits applied to your next tax bill, and if during the year you find that you’re withholding too much or too little, you can submit a new Form W-4V.

Another option: File estimated tax payments quarterly to avoid an underpayment penalty from the IRS when you file your tax return. Generally, if you owe more than $1,000 when you file your return — often because of income outside of Social Security that had no taxes withheld — the IRS may hit you with an underpayment penalty.

If you end up paying too much, you’ll get the excess back as a refund, as you did when you were drawing a paycheck.

Some states tax benefits too

Eight states levy their own taxes on Social Security benefits: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah and Vermont.

The taxation rules vary by state. AARP has supported legislation in a host of states to reduce or eliminate taxation of Social Security income. Several states have ended taxation of benefits in recent years, including West Virginia in 2026 and Kansas, Missouri and Nebraska in 2024.

Benefits haven’t always been taxed

For more than four decades after Social Security sent out its first check in 1940, benefits weren’t federally taxed. However, Congress overhauled the program’s finances in 1983, and since the year after that, the U.S. government has taxed some portion of Social Security income for some beneficiaries.

But the government doesn’t treat that money the same way it treats general tax revenues. Like your payroll taxes, the federal income taxes collected on benefits go into the Social Security trust funds. That means the money contributes to future benefit payments and helps shore up the Social Security system’s finances.

According to the latest annual report from Social Security’s trustees, the trustees had a $2.56 trillion surplus at the end of 2025, but those reserves are dwindling as the system now pays out more in benefits each year than it collects in taxes. The trustees project that the surplus will run out in 2034, meaning benefits will be reduced unless Congress passes legislation to shore up the system’s finances.

Linda Dono, Tamara E. Holmes and Tracy Thompson contributed to this article.

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