Social Security Recipients: Do You Qualify for These 4 Tax Breaks?
What do you mean there’s a chance you might have to pay taxes on your Social Security benefits, which is based on income you’ve already paid taxes on? Yes, it’s confusing, but if you're collecting those Social Security checks, your tax bill doesn’t necessarily disappear.
According to both the AARP and Social Security Administration, depending on your income, up to 50% or even 85% of your Social Security benefits can be taxed. However, before you focus on the “yikes” of it all, there are a few things to keep in mind.
While you may pay taxes on these benefits if your income is too high or you’ve had tax payments withheld in some variation from your paycheck, as location also matters -- some states tax Social Security, and some don’t.
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Simply put, the IRS looks at your combined income, which includes wages, retirement withdrawals, interest and about half of your Social Security benefits. However, the good news is there are still several little-known tax breaks for retirees and Social Security recipients in 2026 that can shrink your tax bill quite significantly. Here's a look at four of them.
1. Tax-Deductible IRA Contributions (Yes, Even in Retirement)
One of the most overlooked tax strategies for retirees is continuing to contribute to an IRA, as these contributions can be fully or partially tax-deductible to lower your adjusted gross income. In 2026, you can contribute up to $7,500, or $8,600 if you’re age 50 or older, thanks to catch-up contributions.
A lower AGI means you have less of a chance your Social Security benefits are taxed at higher levels. Contributions to a health savings account (HSA) might also be tax-deductible and reduce your taxable income.
2. Business and Side Hustle Deductions
If you started a business or took up an income-producing hobby in retirement, you'll have to pay self-employment income tax if your earnings reach a certain level because no one outruns the tax man. For example, if you dabble in freelancing, consulting, renting out your space or selling crafts, the IRS lets you deduct ordinary and necessary business expenses, such as the following:
Supplies and materials
Advertising and marketing
Home office expenses
Professional services
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These deductions reduce your taxable income, which can also reduce how much of your Social Security gets taxed. Keep that in mind for all of your post-workforce business ventures to save some real cash when it comes to tax season.
3. Qualified Charitable Distribution
If you’re 70½ or older, the IRS is here to tell you that a qualified charitable distribution (QCD) is one of the most powerful tax moves available in 2026. How does it work? Well, if you donate directly from your IRA to a qualified charity, the distribution is excluded from your taxable income.
Plus, it can also count toward your required minimum distribution, which is a win-win. Retirees should also note that you can donate up to about $111,000 per year per person using QCDs, according to the financial experts over at Charles Schwab. Remember, this is especially valuable because it lowers your AGI directly, which is something standard charitable deductions don’t always do.
4. Tax-Loss Harvesting
Nobody actually likes losing money on the stock market, but sometimes you can use losses to your advantage when it comes to taxes. So take those lemons and make lemonade in the form of tax-loss harvesting, which helps you offset capital gains with investment losses and carry forward additional losses into future years. You can deduct up to $3,000 per year from ordinary income, which can lower your overall taxable income and potentially keep you below Social Security tax thresholds.
Vance Cariaga contributed to the reporting for this article.
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This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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