How To Reduce Your Social Security Taxes, According to Fidelity

Core Insights - The recent passage of the One, Big, Beautiful Bill Act includes a temporary tax deduction aimed at reducing taxation on Social Security benefits for individuals over 65, with a deduction of $6,000 for individuals and $12,000 for couples [1] Taxation of Social Security Benefits - Up to 85% of Social Security benefits can be taxed based on household income, with thresholds set at $34,000 for individuals and $44,000 for couples for maximum taxation [3] - Income levels between $25,000 and $34,000 for individuals or $32,000 and $44,000 for couples result in up to 50% of benefits being taxable, while incomes below $25,000 for individuals or $34,000 for couples are not taxed [3] Other Tax Considerations in Retirement - Withdrawals from traditional IRAs and 401(k) accounts are taxable as regular income, which should be included when calculating total income for tax bracket determination [4] - Distributions from Roth IRAs, 401(k)s, and health savings accounts (HSAs) are not taxed, as these accounts are funded with after-tax money [5] Strategies to Reduce Tax Liability - Contributing to a Roth IRA or 401(k) can help reduce future tax liabilities on Social Security benefits, as these accounts allow for tax-free withdrawals [7] - Converting traditional IRA or 401(k) savings to a Roth account incurs taxes at the time of conversion but can lower taxable income in the future, potentially reducing the taxable portion of Social Security benefits [7]