How much of my Social Security income is taxable in 2026?
The taxability of Social Security benefits depends on your combined income, also called provisional income, which is your adjusted gross income plus nontaxable interest plus half of your Social Security benefits. If provisional income exceeds $25,000 (single) or $32,000 (married filing jointly), up to 50% of benefits may be taxable. Above $34,000 (single) or $44,000 (joint), up to 85% of benefits are subject to federal income tax under IRC Section 86. Many retirees are surprised to find that pension income, IRA distributions, and investment income all push them into the higher threshold.
What is a Required Minimum Distribution and when must I start taking it?
A Required Minimum Distribution (RMD) is the minimum amount the IRS requires you to withdraw annually from traditional IRAs, SEP IRAs, SIMPLE IRAs, and most employer-sponsored retirement plans once you reach a certain age. Under the SECURE 2.0 Act, the RMD starting age is 73 for individuals who turn 72 after December 31, 2022. The RMD amount is calculated by dividing your prior year-end account balance by a life expectancy factor from IRS Publication 590-B. Failure to take the full RMD results in a 25% excise tax on the shortfall under IRC Section 4974, reduced to 10% if corrected within two years.
Can I reduce my RMD by making a Qualified Charitable Distribution?
Yes. A Qualified Charitable Distribution (QCD) allows IRA owners aged 70.5 or older to transfer up to $105,000 per year (indexed for inflation) directly from their IRA to a qualified charity. The QCD satisfies all or part of the RMD requirement and is excluded from gross income entirely under IRC Section 408(d)(8). This is one of the most powerful strategies for retirees who do not need the RMD for living expenses, because it reduces adjusted gross income, which in turn can reduce the taxability of Social Security benefits, Medicare IRMAA surcharges, and the taxation of other income.
Are medical expenses deductible for retirees in 2026?
Yes. Retirees who itemize deductions can deduct unreimbursed medical expenses that exceed 7.5% of adjusted gross income under IRC Section 213. Qualifying expenses include Medicare premiums (Parts A, B, C, and D), long-term care insurance premiums (subject to age-based limits), prescription drugs, dental and vision care, hearing aids, and medical travel. Many retirees with significant healthcare costs find that their total medical expenses exceed the 7.5% floor, making itemizing more beneficial than taking the standard deduction.
What is a Roth conversion and how can it help retirees reduce taxes?
A Roth conversion involves transferring funds from a traditional IRA or 401(k) to a Roth IRA, paying income tax on the converted amount in the year of conversion. For retirees, strategic Roth conversions in years when income is lower — particularly between retirement and age 73 when RMDs begin — can reduce future RMDs, lower the taxability of Social Security benefits, and reduce Medicare IRMAA surcharges. Converted amounts grow tax-free and qualified distributions from a Roth IRA are never subject to income tax or RMD requirements during the owner's lifetime under IRC Section 408A.
Is my pension income taxable?
Most pension income from employer-sponsored defined benefit plans is fully taxable as ordinary income in the year received, because contributions were made on a pre-tax basis. If you made after-tax contributions to the plan, a portion of each payment representing the return of those contributions is excluded from income using the Simplified Method under IRC Section 72. State taxation of pension income varies widely — some states exempt all or part of pension income, while others tax it fully. Federal taxation of pension income is reported on Form 1099-R.
Can I still contribute to an IRA after I retire?
Yes, provided you have earned income. Under the SECURE Act, there is no age limit for contributing to a traditional IRA as long as you have earned income such as wages, self-employment income, or alimony received under pre-2019 divorce agreements. The 2026 contribution limit is $7,000, with a $1,000 catch-up contribution available for those aged 50 and older, for a total of $8,000. Roth IRA contributions are also permitted regardless of age, subject to income phase-out limits. However, if you are taking RMDs from a traditional IRA, you cannot roll the RMD back into an IRA.
What is the standard deduction for retirees in 2026?
For 2026, the standard deduction is $15,750 for single filers and $31,500 for married filing jointly, reflecting inflation adjustments under the OBBBA. Taxpayers aged 65 or older receive an additional standard deduction amount of $2,000 (single) or $1,600 per qualifying spouse (married). A single retiree aged 65 or older therefore has a standard deduction of $17,750, and a married couple where both spouses are 65 or older has a standard deduction of $34,700. These enhanced amounts make itemizing less common for retirees with modest medical expenses.
Are long-term care insurance premiums deductible?
Yes, premiums paid for a qualified long-term care insurance contract are deductible as medical expenses under IRC Section 213(d)(10), subject to age-based annual limits. For 2026, the deductible limits are approximately $480 (age 40 or under), $900 (age 41-50), $1,800 (age 51-60), $4,770 (age 61-70), and $5,960 (age 71 or older). These amounts are deductible only to the extent total medical expenses exceed 7.5% of AGI. Premiums paid by a C-Corporation on behalf of an employee-owner are fully deductible without the AGI floor.
How does selling my home affect my taxes in retirement?
Retirees who sell their primary residence may exclude up to $250,000 of capital gain from income ($500,000 for married couples filing jointly) under IRC Section 121, provided they owned and used the home as their principal residence for at least two of the five years preceding the sale. Gain above the exclusion is taxed as long-term capital gain if the home was held more than one year. For retirees in the 0% capital gains bracket (taxable income below $47,025 single or $94,050 joint in 2026), even gains above the exclusion may be tax-free.
What tax credits are available specifically for retirees?
The Credit for the Elderly or Disabled under IRC Section 22 is available to taxpayers aged 65 or older (or those who retired on permanent and total disability) with income below certain thresholds. The credit ranges from $750 to $1,125 depending on filing status. Additionally, retirees who make energy-efficient home improvements may qualify for the Energy Efficient Home Improvement Credit (up to $3,200 per year) and the Residential Clean Energy Credit (30% of qualifying costs) under IRC Sections 25C and 25D. These credits directly reduce tax liability dollar for dollar.
What happens to my taxes if I do part-time or consulting work in retirement?
Part-time or consulting income earned in retirement is subject to self-employment tax (15.3% on net earnings up to the Social Security wage base, 2.9% above) in addition to income tax. However, this earned income also enables continued IRA contributions and may qualify for the QBI deduction if structured as a business. Self-employed retirees can deduct health insurance premiums above the line under IRC Section 162(l), and can establish a SEP-IRA or Solo 401(k) to shelter a portion of consulting income from tax. The additional income also increases provisional income, potentially making more Social Security benefits taxable.
