Many retirees have heard that Social Security is now tax-free. The reality is more nuanced. Here’s what Arizona seniors need to know for 2026.
Federal Taxation of Social Security Still Exists
The basic federal rules have not changed. Up to 85% of your Social Security benefits can still be subject to federal income tax, depending on your combined (provisional) income:
- Single filers:
- $25,000 or less → $0 taxable
- $25,001 – $34,000 → up to 50% taxable
- Over $34,000 → up to 85% taxable
- Married Filing Jointly:
- $32,000 or less → $0 taxable
- $32,001 – $44,000 → up to 50% taxable
- Over $44,000 → up to 85% taxable
New Temporary Senior Deduction Helps Many
Under the One Big Beautiful Bill Act, taxpayers age 65 and older can claim an additional deduction of up to $6,000 per person ($12,000 for a qualifying married couple) for tax years 2025 through 2028.
This deduction can significantly reduce or even eliminate federal tax on Social Security benefits for many middle-income seniors, even though the underlying taxation rules remain the same.
The deduction begins to phase out at higher income levels ($75,000 single / $150,000 joint).
Arizona Does Not Tax Social Security
Good news for Arizona residents: The state of Arizona does not tax Social Security benefits. This has been the case for years and continues in 2026.
What Arizona Retirees Should Do
- Review your combined income to see if any of your benefits are federally taxable.
- Claim the new senior deduction if you are age 65 or older and eligible.
- Coordinate withdrawals from IRAs or 401(k)s carefully, since they can increase the taxable portion of your benefits.
- Work with a tax professional to minimize overall tax on retirement income.
Need Help With Your Retirement Tax Planning?
Vault Financials helps Arizona retirees understand how Social Security, the new senior deduction, and other retirement income interact so you keep more of what you’ve earned.
Contact us today for personalized guidance.
Disclaimer: This article is for educational purposes only. Tax rules can change and individual situations vary. Consult a qualified tax professional for advice specific to your situation.