Key Takeaways
- The IRS taxes Social Security benefits only in part: up to 50% of them once half the benefit plus other income passes $25,000 for a single filer, and up to 85% past $34,000.
- A hypothetical single 66-year-old living on $36,000 of Social Security and $20,000 of IRA withdrawals owes $580 in 2026 federal income tax, against $3,820 for one drawing all $56,000 from an IRA.
- Only $7,900 of the first retiree’s benefits is taxable, while every IRA dollar is.
- The higher bill can still pay off for someone delaying benefits, since it buys a bigger check later that the IRS taxes more lightly.
Take two single 66-year-olds who each live on $56,000 a year. The first gets $36,000 from Social Security and pulls $20,000 from an IRA. The second is holding off on Social Security and pulls all $56,000 from an IRA.
Their 2026 federal income tax bills are $580 for the first retiree and $3,820 for the second.
That’s a $3,240 gap on the same spending money, and it comes down to how the IRS counts Social Security.
Jeffrey Levine summed it up on the Oct. 22 episode of The Great Retirement Debate: “my IRA income is going to be taxed dollar for dollar as I take it out.” Social Security, he added, is taxed at 85 cents on the dollar even in the worst case.
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Only part of a Social Security check counts
The rule is laid out in IRS Publication 915. Benefits start to become taxable when half of them plus your other income passes $25,000 for a single filer ($32,000 joint). Above that line, up to 50% of benefits can be taxed. Above a second line at $34,000 ($44,000 joint), up to 85% can be. Neither line rises with inflation.
Two deductions come off the top. The IRS’s 2026 standard deduction for a single filer is $16,100. The new senior deduction adds $6,000 for anyone 65 or older from 2025 through 2028. It phases out once modified adjusted gross income passes $75,000, and both retirees are well under that. So each takes $22,100.
The 2026 brackets are 10% on the first $12,400 of taxable income and 12% above that, up to $50,400.
How $56,000 turns into $5,800
Start the first retiree with half the benefit, $18,000, and add the $20,000 IRA withdrawal. That’s $38,000, or $4,000 past the $34,000 line.
Half of the $9,000 between the two lines counts as taxable, which is $4,500. Then 85% of the $4,000 above $34,000 counts, another $3,400. Together, $7,900 of the $36,000 benefit is taxable. That’s nowhere near the cap of 85% of the benefit, which would be $30,600.
So $28,100 of that Social Security never shows up as taxable income. Add the $7,900 to the $20,000 IRA withdrawal, and the IRS sees $27,900. Take off $22,100 of deductions, and $5,800 is left, all taxed at 10%. That comes to $580.
The second retiree’s math is shorter. All $56,000 is taxable. Subtracting $22,100 leaves $33,900. The first $12,400 is taxed at 10%, which is $1,240. The other $21,500 is taxed at 12%, which is $2,580. The total is $3,820.
| Metric | Social Security + IRA | All IRA |
|---|---|---|
| Cash income | $56,000 | $56,000 |
| Taxable Social Security | $7,900 | $0 |
| Income the IRS counts | $27,900 | $56,000 |
| After $22,100 of deductions | $5,800 | $33,900 |
| 2026 federal income tax | $580 | $3,820 |
That’s $3,240 a year for drawing the same money from a different place.
The bigger bill can buy a bigger check
The second retiree is delaying Social Security for a reason. Waiting raises the yearly check for life, and Levine called delaying “probably the single greatest way to help avoid running out of money.”
He’d make the same trade on taxes. Levine said he would spend more IRA money today in exchange for the same dollars in Social Security later, because those later dollars are taxed more lightly. He added that drawing an IRA down early also shrinks the required withdrawals that come later.
So the $3,240 is real, but it’s one year of a longer trade. Once the bigger check starts, the second retiree needs less from the IRA each year, and more of their income falls under Social Security’s lighter tax rules.
The choices that move the bill
The levers are federal, and most of them come down to timing:
- The mix: Pairing benefits with smaller IRA withdrawals keeps more income under Social Security’s rules. The first retiree pays tax on only 22% of benefits.
- The $34,000 line: Past it, each extra IRA dollar pulls 85 cents of benefits into taxable income along with the dollar itself. At the first retiree’s 10% rate, that’s 18.5 cents of tax on each extra dollar withdrawn.
- The claiming date: Delaying means paying more tax in the IRA-only years in exchange for a larger, lightly taxed check later.
- The senior deduction’s window: The $6,000 runs from 2025 through 2028, so IRA withdrawals taken in those years carry a smaller tax bill.
What changes next
Frankly, this $3,240 gap is a good reason to blend income sources where you can. For a healthy retiree who is delaying benefits, though, it’s a cost worth paying. Poor health, or no other money to draw on, are the reasons to claim sooner instead.
The math also shifts from here. Social Security’s 3.6% cost-of-living raise starts with December 2026 benefits, paid in January 2027, while the $25,000 and $34,000 lines stay put. If the first retiree keeps drawing $20,000 from the IRA, the raise lifts the benefit to $37,296. Half of that is $18,648, which pushes the taxable share of benefits from $7,900 to $8,451.
The senior deduction ends after 2028. At 2026’s brackets and standard deduction, losing it would raise the first retiree’s bill to $1,180 and the second’s to $4,540.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
