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There is no separate federal “earned income tax” on retirement payments. The real question is whether each payment is included in federal taxable income. Social Security uses a combined-income test; pension payments depend on cost and plan rules; traditional and Roth IRA distributions follow different tax rules. The guidance below applies to 2025 federal returns generally filed in 2026. State taxes are not covered.
What “earned income tax” means for retirement payments
Earned income normally means compensation from work, such as wages, salaries, tips or self-employment income. Social Security benefits, pension checks and IRA distributions are generally retirement or investment income, not earned income. They are not subject to a special tax simply because you received them after retiring.
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Instead, each source has its own federal income-tax rules. A payment can be entirely taxable, partly taxable or excluded from gross income, depending on the type of payment and your facts. Filing status, other income, tax-exempt interest, after-tax contributions and the terms of a pension or annuity can all change the result.
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1Scan for outdated or missing drivers - takes under a minute2Repair Windows errors before they cause bigger problems3Fix the driver behind crashes, sound loss and screen glitchesSocial Security: use the 2025 combined-income test
Social Security is not automatically taxable and is not automatically tax-free. For 2025, the IRS says to add one-half of your Social Security benefits to all your other income, including tax-exempt interest. Compare that combined amount with the base amount for your filing status. On a joint return, include both spouses’ income and benefits.
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Step 1: calculate combined income
Use this calculation before completing the IRS worksheet:
Combined income = one-half of Social Security benefits + all other income + tax-exempt interest.
If the total does not exceed your filing-status base amount, none of your benefits is taxable under this test. If it exceeds the base amount, some benefits may be taxable. The threshold itself does not tell you the exact taxable amount; use the worksheet in IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits, for the 2025 tax year.
Step 2: apply the filing-status base amount
| 2025 filing status | Base amount used in the Social Security test | Important condition |
|---|---|---|
| Single, head of household or qualifying surviving spouse | $25,000 | 2025 federal rules |
| Married filing jointly | $32,000 | Include both spouses’ income and benefits |
| Married filing separately | $25,000 | Only when you lived apart from your spouse for the entire year |
| Married filing separately | $0 | When you lived with your spouse at any time during 2025 |
These are the IRS’s 2025 base amounts. A different tax year can have different figures, so use the publication and worksheet for the year you are filing.
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How much of the benefit can be included?
Under the circumstances described by the IRS, generally up to 50% of Social Security benefits can be taxable. In higher-income cases, up to 85% can be included in taxable income. “Up to 85% taxable” means that share of the benefit is included in income; it does not mean an 85% tax rate.
For 2025, the IRS identifies the situations in which the 85% maximum can apply when one-half of benefits plus other income exceeds $34,000 for a taxpayer who is not married filing jointly, or $44,000 for married filing jointly. Married filing separately while living with a spouse during 2025 is also subject to the special rules. Use the worksheet rather than trying to apply these figures as a flat tax.
How to report Social Security
Use the net benefits shown on Form SSA-1099. Report the net benefits on Form 1040 or Form 1040-SR, line 6a, and report the taxable portion on line 6b. If Social Security was your only income during 2025, the benefits generally are not taxable and you probably do not have to file a return, although another filing requirement can still apply if you had other income or a special circumstance.
“If the only income you received during 2025 was your social security or the SSEB portion of tier 1 railroad retirement benefits, your benefits generally aren’t taxable and you probably don’t have to file a return.” — Internal Revenue Service, Publication 915 (2025)
Pensions and annuities: determine the taxable and tax-free portions
A pension check is not automatically 100% taxable. IRS Publication 575 explains that a distribution can include recovery of your cost, also called your investment in the contract. The portion that represents recovery of that cost is generally tax-free under the applicable rules; the remainder is taxable.
Why your basis matters
Your cost or basis can arise from amounts you contributed that were not previously deducted, or from other after-tax investment in the contract. If you have no cost under the applicable rules, the payments may be fully taxable. If you do have cost to recover, each payment may contain a tax-free recovery portion and a taxable portion until the basis has been recovered.
Which calculation method applies?
The plan, payment type and annuity starting date determine how the tax-free portion is calculated. Depending on those facts, you may use the IRS Simplified Method or the General Rule. The Simplified Method spreads your cost over an IRS-determined number of expected payments; the General Rule uses actuarial calculations and applies in situations where the Simplified Method is not available or required. Follow the method that applies to your plan rather than assuming that a fixed percentage of every check is tax-free.
Federal civil-service retirement and some other categories have separate IRS guidance. If your statement or plan administrator identifies a special category, use the publication that covers that category in addition to Publication 575. Keep records of your after-tax contributions and the basis calculation, because changing or missing basis information can cause you to pay tax twice on the same money.
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Traditional IRA withdrawals: deductible contributions, basis and Form 8606
Traditional IRA distributions can be fully or partly taxable. If every contribution you made was deductible and you have no after-tax rollover or other basis, the distribution is generally fully taxable when received.
When a distribution is partly tax-free
Nondeductible contributions and after-tax amounts rolled into a traditional IRA create basis. The basis portion is not taxed again. Until the basis is exhausted, a distribution can contain a tax-free return of basis and a taxable portion representing deductible contributions, earnings and gains. The calculation generally considers all of your traditional, SEP and SIMPLE IRAs together rather than allowing you to choose only the account from which you withdrew money.
Form 8606 and your records
Form 8606 is used in applicable nondeductible-contribution and after-tax-basis situations. Use your prior Forms 8606, contribution records and rollover documentation to establish basis. If you fail to track basis, the taxable portion can be overstated. IRS Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs), explains the distribution rules and the circumstances requiring the form.
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One free scan finds every outdated or missing driver and matches the right update for your exact hardware.Free scan · exact hardware matchRoth IRA withdrawals: qualified distributions versus other distributions
Roth IRA treatment differs from traditional IRA treatment. Qualified Roth IRA distributions and returns of your regular Roth contributions generally are not included in gross income. That does not make every Roth withdrawal automatically tax-free.
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A distribution that does not meet the qualified-distribution rules can have a taxable component. The ordering rules generally treat regular contributions as coming out before earnings, but earnings and other amounts can be taxable when the applicable requirements are not met. Check the qualification requirements and the account’s contribution and conversion history before treating a withdrawal as tax-free. Publication 590-B provides the federal rules for the tax year.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Social Security, pensions and IRAs compared
| Payment source | Special income test? | What determines the taxable portion? | Main IRS guidance or reporting reference | Tax year covered here |
|---|---|---|---|---|
| Social Security | Yes. One-half of benefits plus other income, including tax-exempt interest, is compared with a filing-status base amount. | Filing status, combined income and the worksheet calculation; generally up to 50%, or up to 85% in higher-income cases, can be included. | Publication 915; Form 1040 or 1040-SR lines 6a and 6b; Form SSA-1099 | 2025 |
| Pension or annuity | No Social Security-style combined-income test. | Cost or basis, the plan and payment type, and whether the Simplified Method or General Rule applies. | Publication 575 and any category-specific IRS guidance | 2025 rules |
| Traditional IRA | No Social Security-style combined-income test. | Whether contributions were deductible, the amount of after-tax basis and the taxable earnings or gains in the distribution. | Publication 590-B; Form 8606 when applicable | 2025 rules |
| Roth IRA | No Social Security-style combined-income test. | Whether the distribution is qualified, whether it is a return of regular contributions, and the account’s conversion and earnings history. | Publication 590-B | 2025 rules |
A practical filing workflow
- Separate each income source. Gather Form SSA-1099 for Social Security, pension or annuity statements, and records for every IRA distribution.
- Identify your filing status. The Social Security base amount changes substantially with filing status, including whether a married-filing-separately taxpayer lived with a spouse at any point in 2025.
- Compute Social Security combined income. Add one-half of benefits, all other income and tax-exempt interest. Then complete the Publication 915 worksheet to calculate the taxable amount.
- Review pension basis. Determine whether part of each payment is recovery of your cost. Confirm whether the Simplified Method or General Rule applies and retain the calculation.
- Classify every IRA distribution. For traditional IRAs, establish deductible versus nondeductible contributions and any after-tax rollover basis. For Roth IRAs, verify whether the distribution is qualified or a return of regular contributions.
- Complete required forms. Report Social Security on lines 6a and 6b of Form 1040 or 1040-SR, and complete Form 8606 when its basis rules apply. Use the current-year IRS instructions for any additional reporting required by your statement.
- Check for filing obligations beyond these payments. A person whose only 2025 income was Social Security may generally not need to file, but other income or a separate filing requirement can change that result.
Common mistakes and how to avoid them
- Calling the rule an earned-income tax. The tax question is inclusion in federal taxable income, not whether a retirement payment is wages.
- Assuming Social Security is always tax-free. Tax-exempt interest and other income count in the combined-income calculation even though tax-exempt interest is not itself taxable.
- Applying the 85% figure as a tax rate. It is the maximum share of benefits that may be included in income under the stated circumstances.
- Taxing every pension dollar. Recovery of documented cost can be tax-free under the applicable method.
- Forgetting IRA basis. Nondeductible contributions and after-tax rollovers are not taxed again, but you must preserve the records and use Form 8606 when required.
- Calling every Roth withdrawal tax-free. Qualified distributions and returns of regular contributions generally are excluded; other distributions can have taxable earnings.
- Using an old threshold or worksheet. The figures in this article are for 2025 federal rules. Use the current publication for another tax year.
What these rules do not decide
This explanation covers U.S. federal income-tax treatment for 2025. It does not determine state income tax, foreign tax, withholding, estimated-tax payments or your personal tax liability. A result can change with your filing status, spouse’s income, other income, pension basis, IRA contribution and rollover history, and the timing and type of distributions.
When the payment is unusual, records are missing, or a large withdrawal could push more Social Security into taxable income, use the current IRS worksheet and the publication for that tax year or obtain advice from a qualified tax professional.
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