In brief
Retirement taxes are not determined by one bracket. A withdrawal can affect federal income tax, how much of Social Security is taxable, Medicare premiums two years later, and state tax—all at the same time.
The eight claims in the popular graphic are directionally useful, but several need context. “Up to 85% of Social Security is taxable” does not mean an 85% tax rate. The familiar 0%, 15%, and 20% capital-gains rates depend on total taxable income. Medicare normally uses income from two years earlier, but certain life-changing events can support an appeal. And state treatment varies by both state and income source.
The annual figures below apply to tax year or premium year 2026, as identified in each section. They are educational examples, not individualized tax advice.
The eight rules at a glance
| Rule | What the number really means in 2026 |
|---|---|
| Up to 85% of Social Security may be taxable | At most 85% of benefits enters taxable income; that amount is then taxed at the taxpayer’s marginal rate |
| Roth IRA withdrawals may be tax-free | Earnings are generally tax-free only when the five-year rule and a qualifying event are satisfied |
| Long-term gains may face 0%, 15%, or 20% federal rates | The rate is determined by taxable income and filing status; special gains and the 3.8% net investment income tax can change the result |
| Medicare generally looks back two years | 2026 IRMAA normally uses 2024 modified adjusted gross income; the first surcharge starts above $109,000 single or $218,000 joint |
| A QCD can satisfy an RMD | An IRA owner age 70½ or older can transfer directly to an eligible charity; the 2026 exclusion limit is $111,000 |
| A Roth conversion raises current taxable income | Previously untaxed converted dollars are generally ordinary income in the conversion year |
| State retirement taxation varies | Some states exempt qualifying retirement distributions, some provide partial exclusions, and others tax them |
| RMDs can raise other costs | A 2026 RMD is generally ordinary income and can affect brackets, Social Security taxation, and 2028 Medicare premiums |
1. Up to 85% of Social Security benefits may be taxable
The key phrase is “up to 85% of benefits,” not “taxed at 85%.” If $30,000 of benefits is received, no more than $25,500 of those benefits can be included in federal taxable income. The included amount is then subject to the person’s ordinary marginal tax rates.
The federal calculation starts with “combined income,” generally:
adjusted gross income before Social Security + tax-exempt interest + one-half of Social Security benefits
The statutory thresholds have not been indexed for inflation:
| Filing status | Up to 50% of benefits may become taxable above | Up to 85% may become taxable above |
|---|---|---|
| Single, head of household, qualifying surviving spouse, or married filing separately while living apart all year | $25,000 | $34,000 |
| Married filing jointly | $32,000 | $44,000 |
Married taxpayers filing separately who lived together during the year generally face a much less favorable rule. The exact taxable amount comes from an IRS worksheet; crossing a threshold does not instantly make the full 50% or 85% taxable.
Why it matters: traditional IRA withdrawals, pensions, interest, realized gains, and Roth conversions can raise combined income and cause more benefits to enter taxable income. Qualified Roth withdrawals generally do not.
Sources: SSA’s 2026 Trustees Report summary and IRS Publication 915.
2. Roth IRA withdrawals are tax-free only when the rules are met
“Roth withdrawals are tax-free” is too broad. A qualified Roth IRA distribution is tax- and penalty-free when both conditions are satisfied:
- The distribution occurs after the five-tax-year period that begins with the first tax year for which the owner made a contribution to any Roth IRA; and
- It occurs after age 59½, after disability, after death for a beneficiary or estate, or for a qualifying first-home distribution subject to a $10,000 lifetime limit.
Roth IRA distribution ordering also matters. Regular contributions generally come out before conversion amounts and earnings, so a nonqualified withdrawal is not automatically taxable. Conversion amounts have their own five-year early-distribution rules.
Example: someone age 62 who opened and first funded a Roth IRA in 2024 has met the age test in 2026 but not yet the five-tax-year test. A distribution of earnings would not yet be a qualified distribution merely because the owner is older than 59½.
Why it matters: “Roth” describes the account’s tax treatment, not an unconditional exemption for every dollar withdrawn at any time.
Source: IRS Publication 590-B.
3. Long-term capital gains use 0%, 15%, and 20% brackets—but the gain is stacked on other income
For 2026, the main federal long-term capital-gains brackets are determined by taxable income, not by the size of the gain alone.
| Filing status | 0% rate applies through taxable income of | 15% rate applies through taxable income of | 20% rate applies above |
|---|---|---|---|
| Single | $49,450 | $545,500 | $545,500 |
| Married filing jointly | $98,900 | $613,700 | $613,700 |
| Head of household | $66,200 | $579,600 | $579,600 |
| Married filing separately | $49,450 | $306,850 | $306,850 |
The practical concept is stacking. Ordinary taxable income fills the lower part of the income stack, then long-term gains sit on top. One realized gain can therefore span the 0% and 15% brackets, or the 15% and 20% brackets.
These are not the only possible rates. Net short-term gains are taxed as ordinary income. Collectibles gains can face a 28% maximum rate, and part of the gain on depreciated real estate can face a 25% maximum rate. The separate 3.8% net investment income tax may also apply above its modified adjusted gross income thresholds.
Why it matters: a retiree may deliberately realize long-term gains in a low-income year, but the sale can also affect Social Security taxation, ACA-related calculations before Medicare, or future Medicare IRMAA.
Sources: IRS Revenue Procedure 2025-32 as modified for 2026 and IRS Topic 409.
4. 2026 Medicare premiums generally use 2024 income
Medicare’s income-related monthly adjustment amount, or IRMAA, adds surcharges to Part B and Part D for higher-income beneficiaries. For 2026, Social Security normally uses modified adjusted gross income from the 2024 federal return. Medicare MAGI for this purpose is adjusted gross income plus tax-exempt interest.
The standard 2026 Part B premium is $202.90 per month. The main IRMAA table is:
| 2024 MAGI—individual return | 2024 MAGI—joint return | 2026 Part B total per month | 2026 Part D surcharge per month |
|---|---|---|---|
| $109,000 or less | $218,000 or less | $202.90 | $0 |
| Above $109,000 through $137,000 | Above $218,000 through $274,000 | $284.10 | $14.50 |
| Above $137,000 through $171,000 | Above $274,000 through $342,000 | $405.80 | $37.50 |
| Above $171,000 through $205,000 | Above $342,000 through $410,000 | $527.50 | $60.40 |
| Above $205,000 but below $500,000 | Above $410,000 but below $750,000 | $649.20 | $83.30 |
| $500,000 or more | $750,000 or more | $689.90 | $91.00 |
The Part D amount is added to the beneficiary’s plan premium. Married-filing-separately beneficiaries who lived with a spouse during the tax year use a different, compressed table.
IRMAA is a cliff-style tier system: one dollar over a boundary can move the beneficiary into the next monthly tier. But the two-year lookback is not always final. Social Security allows a request for a new determination after qualifying life-changing events such as marriage, divorce, a spouse’s death, work stoppage, or work reduction.
Why it matters: a large 2026 Roth conversion or realized gain generally would not affect the 2026 premium; it may affect 2028 premiums.
Sources: SSA’s 2026 Medicare premium table and SSA’s IRMAA reduction process.
5. Qualified charitable distributions can satisfy an RMD
A qualified charitable distribution, or QCD, is an otherwise taxable distribution paid directly from an eligible IRA to an eligible charity for an IRA owner age 70½ or older. A QCD can count toward all or part of the year’s RMD.
The aggregate 2026 QCD exclusion limit is $111,000 per eligible individual, up from $108,000 in 2025. That is a statutory ceiling, not a target and not the amount everyone can deduct.
Example: if a retiree has a $20,000 RMD and directs an $8,000 qualifying QCD from the IRA, the QCD can satisfy $8,000 of the RMD. The remaining RMD is $12,000. The qualifying $8,000 is excluded from income, but the same amount cannot also be claimed as an itemized charitable deduction.
The transfer must go directly from the IRA trustee to the eligible organization. Donor-advised funds and certain supporting organizations do not qualify. QCDs generally come from IRAs, not directly from 401(k)s, and special rules apply to ongoing SEP and SIMPLE IRAs.
Why it matters: excluding the QCD from adjusted gross income can be more useful than taking a taxable RMD and separately claiming a charitable deduction, especially for someone who takes the standard deduction. The result still depends on eligibility and reporting.
Sources: IRS IRA and QCD FAQs and IRS 2026 inflation adjustments for retirement items.
6. Roth conversions increase taxable income in the conversion year
A Roth conversion moves money from a pretax traditional IRA or retirement account into Roth status. The previously untaxed portion is generally included in ordinary income in the year of conversion.
Example: converting $50,000 of fully pretax traditional IRA money in 2026 generally adds $50,000 to 2026 ordinary income. That extra income may fill a higher bracket, cause more Social Security to become taxable, reduce deductions or credits, and affect 2028 Medicare IRMAA.
The taxable amount can be less than the conversion when the owner has nondeductible basis, but the IRS pro-rata calculation generally looks across all traditional, SEP, and SIMPLE IRAs—not just the one account selected for conversion. Form 8606 tracks that basis.
A conversion itself is not automatically subject to the 10% early-distribution tax, but using converted funds to pay withholding or taking conversion dollars out too soon can create separate tax or penalty issues. Conversions completed after 2017 cannot be recharacterized back to a traditional IRA.
Why it matters: the question is not simply “Should I convert?” but “How much fits into the current year’s full tax picture?” Future tax rates are uncertain, so a conversion is a trade-off, not guaranteed savings.
Sources: IRS Topic 309, IRS Publication 590-B, and 2026 Form 1099-R instructions.
7. State taxation can be completely different from the federal result
The graphic says some states do not tax retirement income. That is true in broad terms, but it is not precise enough for planning. States can fall into several categories:
- no broad individual income tax;
- an income tax with exemptions for Social Security or qualifying retirement distributions;
- partial exclusions based on age, income, or benefit type; or
- broader taxation that starts from federal income and then applies state adjustments.
Pennsylvania illustrates why details matter. Its Department of Revenue says payments commonly recognized as old-age or retirement benefits are not subject to Pennsylvania personal income tax when they come from an eligible plan and the retirement conditions are met. IRA distributions can also be exempt when the distribution is not subject to the early-withdrawal penalty. That does not mean every payment from every account is automatically exempt.
Why it matters: moving to a state with favorable retirement-income rules does not establish the total tax result. Property tax, sales tax, estate or inheritance tax, residency, source-income rules, and the exact type of retirement payment may matter. Always check the current revenue-department rules for the state involved.
Source example: Pennsylvania Department of Revenue—retirement distributions.
8. RMDs can push income into higher tax and Medicare tiers
Required minimum distributions are generally calculated by dividing the prior December 31 account balance by an IRS life-expectancy factor. For many original owners, the Uniform Lifetime Table applies.
Example: an IRA owner age 73 in 2026 with a $1,000,000 traditional IRA balance on December 31, 2025 generally uses the age-73 factor of 26.5:
$1,000,000 ÷ 26.5 = approximately $37,736
That distribution generally enters ordinary income. It may occupy a higher marginal bracket, increase the taxable share of Social Security, and affect Medicare IRMAA two years later. “Pushed into a higher bracket” does not mean every dollar is taxed at the higher rate; only dollars within that bracket face its marginal rate.
For people who reach age 73 after 2022 and before 2033, the current RMD starting age is 73. Under current law, it becomes 75 for people who reach age 74 after 2032—generally those born in 1960 or later. Traditional IRAs require RMDs even if the owner is still working. Some workplace plans permit a still-working delay for non-5% owners. Roth IRAs and designated Roth workplace accounts do not require lifetime RMDs from the original owner, although beneficiary rules still apply.
The first RMD can generally be delayed until April 1 of the following year, but that may place the first and second RMDs in the same tax year. Later RMDs are normally due by December 31.
Why it matters: RMD planning begins before RMD age. Pretax withdrawals, QCDs, Roth conversions, and account location can change later distributions, but each choice has current-year consequences.
Sources: IRS RMD FAQs, IRS Publication 590-B, and the Elevation Finance RMD calculator.
How the eight rules interact
The rules are easiest to understand as a chain:
- Pretax withdrawals, RMDs, pensions, conversions, interest, and realized gains can raise adjusted gross income.
- Higher income can make more Social Security taxable.
- Taxable income determines ordinary and capital-gains brackets.
- Modified adjusted gross income can determine Medicare surcharges two years later.
- State law can produce a different taxable-income result from federal law.
This is why a transaction that looks attractive in isolation can have a larger effective cost. It is also why “never cross a bracket” is not a complete strategy: paying some tax now may still be reasonable if it reduces a larger future pretax balance. The answer depends on a multi-year projection and assumptions that can change.
Bottom line
The most important retirement-tax number is rarely a single tax rate. It is the combined effect of income inclusion, bracket stacking, benefit taxation, Medicare thresholds, state rules, and timing.
For 2026, remember the practical corrections: 85% is the maximum share of Social Security included in income, not the tax rate; $49,450 is the single-filer ceiling for the 0% long-term capital-gains bracket; $109,000 and $218,000 are the first 2026 IRMAA thresholds based normally on 2024 income; and $111,000 is the individual QCD exclusion ceiling, not a required charitable amount.
Tax laws and annual thresholds change. Verify current IRS, SSA, CMS, and state guidance, and consider a qualified tax professional when conversions, large gains, charitable distributions, or multi-state issues are material.