The combined income test
The IRS doesn't tax Social Security like ordinary income. Instead, it uses a 'combined income' figure — your other income plus half of your Social Security benefit — and compares that number to two thresholds to decide how much of your benefit is taxable.
The three tiers
Below the first threshold ($25,000 single / $32,000 married), none of your benefit is taxed. Between the first and second threshold ($34,000 single / $44,000 married), up to 50% can be taxable. Above the second threshold, up to 85% can be taxable — but never more than that, regardless of income.
Why this surprises so many retirees
These thresholds were set in the 1980s and 1990s and have never been adjusted for inflation. As wages and other income have risen over the decades, more and more retirees have crossed into taxable territory even though the rule itself hasn't changed — it's a stealth tax increase built into the design.
What you can do about it
Because combined income includes withdrawals from traditional 401(k)s and IRAs, the order and timing of your withdrawals matters. Drawing from Roth accounts (which don't count toward combined income) instead of traditional accounts in a given year can keep you under a threshold. A Roth conversion done in lower-income years can reduce future taxable Social Security by shrinking future required withdrawals.
Common questions
Is this the same as federal income tax on wages? No — this only determines what portion of Social Security gets added to your taxable income; it's then taxed at your normal marginal rate.
Do states tax Social Security too? Most states don't, but a handful do — check your specific state's rules.
Does claiming later change how much is taxed? Not directly — but a larger benefit combined with other income could push more of it into the taxable tiers, worth factoring into a claiming-age decision.