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Social Security benefits are included in your adjusted gross income (AGI) if your combined income, which consists of half of your Social Security benefits and other sources of income, exceeds a certain threshold. This can affect the taxation of those benefits and your eligibility for various tax credits and deductions, which in turn can impact your overall tax liability and financial situation. Here’s what you need to know.
A financial advisor can help optimize your retirement plan to minimize your tax liability.
What Is Adjusted Gross Income (AGI)?
Your AGI is the total income from all sources that you report on your tax return after accounting for specific deductions. It includes your wages, dividends, capital gains, business income, and retirement distributions. This amount serves as the starting point for calculating your taxable income and tax liability. Here are four additional uses for your AGI:
- Itemized deductions: Taxpayers can generally claim either the standard deduction or their itemized deductions, whichever is larger. Certain itemized deductions, including medical expenses and charitable contributions, are calculated using your AGI.
- Tax credits: While deductions shrink your taxable income, credits reduce your tax liability on a dollar-for-dollar basis. Your AGI is used to assess your eligibility for various tax credits, such as the child tax credit, the earned income tax credit and education-related tax credits.
- Retirement account contributions: AGI influences your ability to contribute to a Roth IRA or deduct contributions to a traditional IRA. Your contribution or deduction limit begins to phase out once your AGI exceeds certain thresholds.
- Medicare premiums: Medicare is government-sponsored health insurance for those 65 and older, or for younger individuals with certain qualifying health conditions. AGI is used to determine the premiums you pay for Medicare Part B and Part D. A higher AGI can result in higher Medicare premiums.
You also need to enter your AGI to e-file your tax return, and check the status of your tax refund with the IRS.
How to Calculate AGI
If you’re using tax filing software, the program will calculate your AGI for you as you enter information about your income, deductions and household. If you’d like to find this number yourself, use these steps to calculate your AGI:
- Gather your income sources: Start by collecting all the sources of taxable income that you received during the tax year. This includes wages, salaries, self-employment income, interest, dividends and rental income.
- Take note of income exclusions: Exclude certain types of income that are not used to calculate your AGI. This may include tax-exempt interest, qualified distributions from Roth IRAs and some Social Security benefits.
- Calculate your total income: Add up all your income sources to determine your total income for the year.
- Make above-the-line deductions: Deduct “above-the-line” deductions, also known as adjustments to income, from your total income. Common above-the-line deductions include contributions to traditional IRAs, student loan interest, and educator expenses.
- Calculate your AGI: Subtract the total above-the-line deductions from your total income. The result is your AGI. Mathematically, the formula is: AGI = Total Income – Above-the-Line Deductions.
Take note: When using your AGI to determine your taxable income and tax liability, you will report your AGI on the first page of your federal tax return (Form 1040).
Is Social Security Included in Your AGI?
Social Security benefits are not automatically included in your adjusted gross income (AGI). Instead, only the portion of your benefits that is considered taxable is included in your AGI. Whether any of your benefits become taxable depends on your combined income, which is calculated by adding your AGI, any tax-exempt interest and one-half of your Social Security benefits.
If your combined income falls below the applicable IRS thresholds, none of your Social Security benefits are included in your AGI. As your combined income increases, however, up to 50% or as much as 85% of your benefits may become taxable. Only that taxable portion is included in your AGI and reported as income on your federal tax return.
This distinction matters because AGI is used to determine eligibility for numerous tax deductions, credits and other tax provisions. Even if Social Security is one of your primary income sources, only the taxable portion of those benefits affects your AGI.
How AGI Impacts the Taxable Portion of Your Social Security
You will have to pay federal income tax on your Social Security benefits once your income passes certain thresholds. The IRS looks at your combined income, which is your adjusted gross income (AGI) plus nontaxable interest plus half of your Social Security benefits. If this total exceeds the IRS limits, up to 85% of your benefits can be taxed.
The rules are straightforward. Here’s how Social Security benefits are taxed, as of 2026.
- For single filers: If combined income is between $25,000 and $34,000, the taxable portion of Social Security benefits generally equals 50% of combined income above $25,000, but cannot exceed 50% of net benefits. If combined income exceeds $34,000, up to 85% of net Social Security benefits may be taxable.
- For married couples filing jointly: If combined income is between $32,000 and $44,000, the taxable portion of Social Security benefits generally equals 50% of combined income above $32,000, but cannot exceed 50% of net benefits. If combined income exceeds $44,000, up to 85% of net Social Security benefits may be taxable.
These rules mean that your other taxable income like wages, self-employment income, IRA withdrawals, dividends or interest directly affects how much of your Social Security is taxed.
For example, a single filer with $20,000 in IRA withdrawals and $25,000 in Social Security benefits has combined income of $32,500 ($20,000 + $12,500 = $32,500). While up to 50% of the benefits could potentially be taxable at this income level, the IRS calculation results in $3,750 of taxable Social Security benefits in this example. If the same filer instead withdrew $30,000 from the IRA, combined income would rise to $42,500 ($30,000 + $12,500 = $42,500), potentially making up to 85% of the benefits taxable. The IRS provides a worksheet for calculating the taxable amount in Publication 915.
The higher your AGI, the more of your benefits are exposed to tax. Even modest amounts of extra income can push you over the thresholds. This reduces the net value of your Social Security and can increase your total tax liability.
Managing AGI is important for retirees. Strategies such as using Roth withdrawals, making qualified charitable distributions or selling investments at a loss in a taxable brokerage account can help limit AGI. While these strategies don’t eliminate taxes entirely, they may reduce how much of your Social Security benefits is taxable.
Understanding how AGI interacts with Social Security taxation helps you forecast your true after-tax retirement income. By planning withdrawals and monitoring combined income, you can stay below thresholds where possible and hold onto more of your monthly benefit.
See how your total income, including Social Security, could affect your tax bill by using our income tax calculator.
Tips for Lowering Your AGI
Reducing your AGI can help lessen your overall tax liability. Here are five common tax strategies to help you lower your AGI if you’re retired:
- Withdraw from after-tax accounts first: If you have a mix of traditional and Roth retirement accounts, withdrawing from your Roth accounts first could reduce AGI. Qualified withdrawals from a Roth IRA are 100% tax-free.
- Sell investments with smaller gains: Selling investments in a taxable brokerage account can generate capital gains that are included in your AGI. Choosing investments with smaller gains relative to their cost basis can help limit the increase to your AGI.
- Consider a Roth conversion: If your income was too high during your working years to contribute to a Roth IRA, you may consider a conversion when you retire. A conversion lets you move tax-deferred assets to a Roth account so future qualified withdrawals are tax-free. You will, however, have to pay taxes on your traditional IRA at the time of the contribution.
- Find tax deductions and credits: Depending on your situation, there could be several tax deductions that you’re eligible for. For example, you may be able to deduct medical expenses that exceed 7.5% of your AGI, property tax deductions or mortgage interest if you’re still paying off your home.
- Harvest losses: Tax-loss harvesting is a strategy that helps you use capital losses to offset capital gains in your portfolio. If losses exceed gains, you can deduct up to $3,000 in excess losses from your income.
Bottom Line
Understanding how Social Security affects your adjusted gross income (AGI) can help you plan for taxes in retirement. Your AGI can affect the taxable portion of your Social Security benefits, eligibility for certain deductions and credits, and other costs tied to income. Keeping accurate income and deduction records can make it easier to calculate your AGI and identify potential tax-planning opportunities.
“Your adjusted gross income is probably the most important tax number that you should know. Not only does it impact the amount of Social Security benefits subject to tax, it also impacts your ability to take certain tax deductions and tax credits. For those on Medicare, it can lead you to pay a higher premium as well,” said Matthew Hofacre, MSPFP, CFP®, EA.
Matthew Hofacre, MSPFP, CFP®, EA provided the quote used in this article. Please note that Matthew is not a participant in SmartAsset AMP, is not an employee of SmartAsset and has been compensated. The opinion voiced in the quote is for general information only and is not intended to provide specific advice or recommendations.
Tips for Retirement Planning
- Social Security benefits are just one of many considerations of retirement planning. A financial advisor can help you create a retirement plan to reach your long-term financial goals, including factoring in potential Social Security benefits. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- You can use a tool, like a free retirement calculator, to help estimate if you’re saving enough for your retirement goals.
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