How to Pay Zero Taxes on Your Social Security Benefits
Most retirees don’t realize it, but they’re likely overpaying in taxes on their Social Security benefits. The good news? With the right strategy, you can dramatically reduce—or even eliminate—the taxes on your Social Security income.
In this post, we’ll walk through a real-life case study to show how one couple legally kept more of their retirement income and slashed their tax bill.
The Retirement Income Puzzle
Let’s look at a recently retired client. Before retirement, they were earning a high income, but as soon as they stopped working, their ordinary income dropped to zero. However, they had a pension that provided $25,000 annually.
They also delayed taking Social Security until age 70, which maximized their benefits to $89,950 per year.
How Social Security Taxes Are Calculated
Most people don’t realize that Social Security benefits are only partially taxed, depending on what’s called provisional income.
Provisional income is calculated as:
Half of your Social Security benefits + All other taxable income (including pensions, withdrawals from pre-tax accounts, wages, and interest).
For this couple:
✔️ Pension Income: $25,000
✔️ Half of Social Security Benefits: $44,975
✔️ Total Provisional Income: $69,975
Since their provisional income was below certain IRS thresholds, only $29,631 of their Social Security benefits ended up being taxable!
How Their Tax Bill Stayed So Low
After applying the 2025 standard deduction, their taxable income was just $23,522—keeping them firmly in the 10% tax bracket.
🚨 Final Tax Bill? Just $2,300. 🚨
That means this couple was able to generate over $115,000 of annual income and pay almost nothing in taxes.
The Key to Keeping More of Your Money
So how did they do it? They planned.
✅ They built up a cash reserve in the years leading up to retirement.
✅ They delayed Social Security to maximize their benefits.
✅ They controlled their taxable income by relying on cash and pension first.
By knowing the rules, they kept more of their money and paid far less in taxes than most retirees.
What This Means for You
If you’re nearing retirement, now is the time to:
🔹 Plan how and when you’ll claim Social Security to minimize taxes.
🔹 Understand your provisional income and tax brackets.
🔹 Use tax-efficient income sources like Roth IRAs, cash, or HSAs to supplement your retirement.
Most retirees pay way more in taxes than necessary—but with a little planning, you don’t have to be one of them.
Want to see the math in action? Watch our full breakdown in this video: Watch Here
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