Medicare, Social Security, and Insurance

8/2/2023 | By Sandra Block

Many retirees are surprised to discover that as much as 85% of their Social Security benefits could be taxable.

It all depends on their amount of provisional income, which includes half of their Social Security benefits plus other sources that contribute to adjusted gross income (AGI), such as wages, dividends, and capital gains.

But here are a few ways to trim a potential tax bite:

Convert traditional IRAs to a Roth.

Unlike withdrawals from a traditional IRA or 401(k) plan, withdrawals from a Roth won’t increase taxes on your benefits. If you’ve had a Roth account for at least five years and you’re 59½ or older, withdrawals are tax-free, which means they won’t be included in your provisional income.

When you convert money in a traditional IRA to a Roth, you must pay taxes on the amount you convert. (Part of the conversion won’t be taxed if you’ve made nondeductible contributions to your IRA.) Endeavor to convert just enough each year to remain within your tax bracket, with the goal of completing your conversions before you must start taking required minimum distributions (at age 73 in 2023, increasing to 75 in 2033).

If you’re still working, diverting some of your retirement contributions to a Roth 401(k) will also help lower taxes on your benefits when you file for Social Security, because withdrawals from those accounts will also be tax-free.

Donate money from your traditional IRA to charity.

A qualified charitable distribution is a donation that is made directly from your IRA to a qualified charity. This will reduce your adjusted gross income, which means it can lower taxes on your Social Security benefits too.

You can make a QCD as early as age 70 1/2, but when you reach the age at which you’re required to take distributions, the charitable distribution will count toward your RMD.

Delay claiming Social Security benefits.

social security taxes seal

At first blush, this strategy may sound counter-intuitive because it will increase the amount of Social Security benefits included in your provisional income. You’ll receive an 8% delayed-retirement credit for every year you delay after your full retirement age until age 70.

But if you draw down funds from your IRAs and other accounts to pay expenses while you delay benefits, there will be fewer of those assets left to tax when you file for Social Security.

Make your taxable portfolio tax efficient.

A taxable portfolio that generates lots of dividends, interest, or capital gains distributions will increase your AGI, which can in turn increase taxes you’ll pay on your Social Security benefits.

Consider using your taxable portfolio to invest in growth-oriented stocks or stock funds, which tend to be more tax efficient than funds that throw off a lot of taxable gains. As long as you hold the stocks or funds for at least 12 months before selling, they’ll be taxed at the long-term capital gains rate, which ranges from 0% to 20%.

Meanwhile, house your fixed-income investments that generate taxable income — such as CDs, corporate bonds, and high-yield bonds and bond funds — in your IRAs, where gains grow tax-deferred until you take withdrawals.

Sandra Block is a senior editor at Kiplinger’s Personal Finance magazine. For more on this and similar money topics, visit

©2023 The Kiplinger Washington Editors, Inc. Distributed by Tribune Content Agency, LLC.

Read similar articles on Seniors Guide like this one: How to Maximize Social Security Benefits

Sandra Block

Sandra Block is a senior editor at Kiplinger’s Personal Finance magazine. For more on this and similar money topics, visit