At 73 and Still Working Full Time, Can You Avoid Taxes on Social Security?
A 73-year-old full-time worker fears a surprise tax bill on Social Security benefits. Here's what to know about the rules.
A 73-year-old still pulling a full-time paycheck has raised a question that thousands of working retirees wrestle with every tax season: is there any legal way to avoid paying federal income taxes on Social Security benefits when earned income is still flowing in? The reader told MarketWatch the situation is unusual — earning more per week now than at any prior point in a decades-long career — and the concern is landing an unexpected tax bill come April.
The core issue is what the IRS calls "combined income," a formula that adds adjusted gross income, nontaxable interest, and half of annual Social Security benefits together. Once that combined figure crosses certain thresholds — $25,000 for single filers and $32,000 for married couples filing jointly — a portion of Social Security becomes taxable. For higher earners, up to 85% of benefits can be subject to federal tax, a reality that catches many working seniors off guard.
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For a 73-year-old with robust earned income, staying below those thresholds is likely impossible, which means the strategic question shifts from avoidance to mitigation. Tax professionals often point to moves such as increasing pre-tax retirement contributions, where eligible, to reduce adjusted gross income. At 73, however, the required minimum distribution rules for most retirement accounts add another layer of complexity, potentially pushing income — and the tax exposure on Social Security — higher still.
Withholding is one practical tool available to beneficiaries. The Social Security Administration allows recipients to request voluntary federal tax withholding at rates of 7%, 10%, 12%, or 22% directly from monthly benefit payments, which can prevent a lump-sum tax surprise when the return is filed. Making estimated quarterly tax payments is another route some working retirees choose to stay current with the IRS and avoid underpayment penalties.
The broader takeaway for seniors in this position is that working past traditional retirement age can be financially rewarding but demands proactive tax planning throughout the year, not just in April. Continue reading at MarketWatch.com.
