The Age When You Stop Paying Taxes on Social Security

You might have heard about a specific age when Social Security benefits become tax-free. It may have been 70, 72, or even 65. Well, whatever age you’ve had in mind, it's time to put this Social Security tax myth to rest.

The fact is, there is no specific age at which your Social Security benefits automatically become nontaxable. However, it’s totally understandable why many people believe that age matters with taxes on Social Security.

So, let’s dive into a couple of the reasons why this myth has taken hold and look at what really impacts whether the IRS will tax some of your Social Security benefits.

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Social Security tax age myth

There are a few reasons why some people think there's a cut-off age for Social Security taxes. One is likely intuitive: you’ve worked hard and may naturally assume those taxpaying years would eventually translate into a tax exemption (similar to "senior" tax benefits and exemptions often offered at the state level). Other reasons might involve simple word-of-mouth and the sheer complexity of U.S. tax laws. 

However, other retirement-related ages can also create confusion.

Required minimum distributions

RMDs. Some may conflate the required minimum distribution (RMD) age with Social Security. At age 73, you must generally start taking RMDs from traditional IRAs and 401(k)s. That’s even more confusing since recent changes to RMD rules shifted that first RMD age from 72 to 73 last year. 

And while RMD requirements are significant for many retirees and shouldn’t be overlooked in tax planning, some may mistakenly associate this age with changes in Social Security tax status.

Full retirement age

FRA. Another issue concerns Social Security's Full Retirement Age (FRA). For Social Security purposes, the FRA is 66-67 for many. At age 70, your Social Security benefits reach their maximum amount. 

But the FRA is sometimes incorrectly thought to directly affect taxes on Social Security benefits. Why? Well, while FRA doesn't directly determine whether your Social Security benefits are taxable, it can indirectly influence your tax situation in a few notable ways.

Benefit amount: Waiting until your FRA to claim benefits typically means a bigger monthly check. While that can be great for your wallet, it could push your total income higher, potentially increasing the taxable portion of your benefits.

Working while claiming: If you're still working while collecting benefits before your FRA, you might face the Social Security Retirement Earnings Test. This could reduce your benefits, potentially lowering your taxable income.

Income strategy: Your FRA is a key milestone in retirement planning. So, it might influence when you tap into other income sources like pensions, retirement savings accounts, etc., which can affect your overall tax situation.

But despite these areas of confusion, keep in mind this one key rule: the taxability of your Social Security benefits depends on your income, not your age.

Whether you're 62 or 82, the same rules apply.

• If Social Security is your only income, you're unlikely to be taxed on those benefits.
• However, up to 85% of your benefits could be taxable if you have additional income sources.

For calculating taxes on Social Security, the key combined income Social Security thresholds (for 2024) are $25,000 for single filers and over $32,000 for those married and filing jointly. If you exceed these thresholds, you may owe taxes on your Social Security benefits, regardless of age.

Note: “Combined Income” = Adjusted Gross Income (AGI) + nontaxable Interest + 1/2 of Social Security benefits.

Remember: States that tax Social Security have different rules and income thresholds.

Reducing taxes on Social Security benefits

You might not be able to avoid being taxed on some of your Social Security benefits, but there are some ways that you can lower your taxable income and potentially reduce the taxable portion of your benefits. 

A few considerations?

• Strategically withdrawing from retirement accounts. Carefully timing withdrawals from diversified "tax buckets" can help lower overall taxable income.
• Making Qualified Charitable Distributions (QCDs) from IRAs: This can satisfy required minimum distributions without increasing taxable income.
• Investing in municipal bonds: This can generate tax-free interest income, potentially keeping total income below Social Security tax thresholds.

Social Security age exemption: Bottom Line

When it comes to taxes on your Social Security benefits, don't wait for a non-existent age-based tax break. (Although, as Kiplinger has reported, some tax breaks do get better with age, like the extra standard deduction for people over age 65.) Instead, focus on tax planning and income management throughout your retirement years.

Remember, when it comes to Social Security and taxes, it's not about how old you are — it's about your taxable income. 

So keep an eye on income thresholds as well as the Social Security COLA adjustment each year and consult with a trusted tax professional. Doing those things will help you be better prepared to file your return and hopefully avoid tax surprises when tax season arrives.

Related

• Six Tax Breaks That Get Better With Age
• How the IRS Taxes Retirement Income
• Calculating Taxes on Social Security Benefits
• Social Security and Your Taxes: Five Things to Know