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A couple with $60,000 in annual Social Security benefits might assume those checks arrive tax-free. But if they also pull $30,000 from a traditional IRA and earn $15,000 in bond interest, they will owe federal income tax on up to 85% of their benefits. The trigger is not how much Social Security pays out. It is how much other income lands on top of it.
The IRS uses a formula called provisional income to decide whether your benefits get taxed. Provisional income equals your adjusted gross income, plus all tax-exempt interest income, plus half of your Social Security benefits. Three thresholds determine the outcome.
The Three Numbers That Decide Your Tax Bill
Single filers begin owing tax on up to half their benefits once provisional income crosses $25,000, and the taxable share rises to 85% above $34,000. The thresholds exist to protect lower-income retirees while capturing those with meaningful outside income.
Married couples filing jointly get modestly higher limits — $32,000 and $44,000 respectively — but face the same escalating structure. The gap between single and joint thresholds is narrower than many couples expect, which is why two-income retirement households often hit the upper tier quickly.
These figures have not changed since 1983 for the lower threshold and 1993 for the upper one. Meanwhile, inflation rose 2.2% year-over-year through January 2026, and per capita disposable income climbed from $63,622 in early 2024 to $66,976 by mid-2025. Fixed thresholds mean more retirees cross into taxable territory every year, even if their purchasing power stays flat.
Consider a single retiree collecting $30,000 in Social Security who also withdraws $20,000 from a traditional IRA. That combination produces $35,000 in provisional income — enough to push 85% of benefits into taxable range. A modest IRA withdrawal is all it takes to cross the upper threshold when Social Security itself is already substantial.
The married couple scenario illustrates how quickly income streams compound the problem. Their combined IRA withdrawals and bond interest push provisional income well past the $44,000 upper threshold, ensuring the maximum 85% of Social Security benefits is taxable. What looks like a comfortable retirement income mix quietly triggers the worst-case tax outcome — not because they are wealthy, but because the thresholds have never been updated for inflation.
How Bond Income Pushes You Over the Line
Interest income counts dollar-for-dollar in provisional income, including tax-exempt municipal bond interest. At 4.05%, a $500,000 Treasury bond portfolio generates roughly $20,250 annually, consuming most of the $25,000 threshold for single filers before Social Security or IRA withdrawals enter the picture.
The declining federal funds rate, now at 3.75% after cuts from 4.5% in 2025, reduces reinvestment yields on maturing bonds and CDs. Lower interest income can help retirees stay below thresholds, but only if they are already close to the line.
What You Can Control
Roth conversions before claiming Social Security let you pay tax on IRA balances at potentially lower rates and eliminate future required minimum distributions from provisional income calculations. Roth withdrawals do not count as income. Neither does cash held in taxable brokerage accounts if you are spending principal rather than interest.
Timing matters. A retiree who delays Social Security until age 70 and lives off Roth conversions and taxable account withdrawals in the interim can avoid provisional income triggers entirely during those years. Once benefits start, the higher monthly check may push provisional income past thresholds, but the Roth balance provides tax-free income to offset the hit.
The thresholds are not changing. Your income mix is the variable you control.