How Much Do Retirees Pay in Taxes? 2026 Data by Income and Age

By Craig Wear, CFP® | Last reviewed: October 26, 2026

How much retirees pay in taxes depends far more on income than on age: about half owe no federal income tax, and the top fifth pays 84% of the bill.

Most retirees pay little or no federal income tax. A Q3 tabulation of Census CPS ASEC 2025 microdata finds 48.6% of tax units headed by someone 65 or older owed federal income tax for 2024. The median payer owed $7,225, and federal income tax took 10.2% of all income received by 65+ households.

How much do retirees pay in taxes?

The typical retiree household pays a few thousand dollars or nothing, while a small high-income group pays most of the total. In the Q3 tabulation of CPS ASEC 2025, the mean federal income tax across all 65+ tax units was $7,744 for 2024, but the median was $0 because 51.4% of units owed nothing or received a net credit.

Federal income tax equaled 10.2% of the $3.5 trillion or so of money income these units received. Adding Census tax model estimates of state income tax (2.1% of income) and payroll tax on wages still being earned (2.3%) brings the all-in rate for 65+ households to 14.6%, against 21.7% for households under 65. The difference comes mostly from payroll tax: retirees without wages owe none.

These numbers come from the Census Bureau’s CPS ASEC tax model, which simulates a return for every household in the survey using reported income and IRS filing rules. Because it covers nonfilers, it answers the question for all retirees, not only those who file. Bracket mechanics are in the 2026 federal income tax brackets guide.

What share of retirees owe any federal income tax?

Just under half of 65+ households owe federal income tax in a given year, even though three in four 65+ tax returns show tax. Both figures are correct; they count different populations.

IRS Statistics of Income counts only returns that were filed. For tax year 2023, 76.0% of 31.2 million returns with a primary taxpayer 65 or older showed income tax before credits (the return counts themselves are covered in how many taxpayers are in the US). The CPS tabulation adds the 15.3 million 65+ units that file no return. Those nonfilers had mean income of $19,991, and Social Security made up 90.1% of it, which is why they owe nothing: benefits below the Publication 915 thresholds are not taxable, and the 65+ standard deduction covers the rest.

Put together, roughly one third of older households do not file, nearly one fifth file but owe nothing, and about half owe tax. For planning, the useful question is not whether retirees pay tax but which side of that line a given income mix falls on.

How does the tax bill change with retirement income?

The federal rate climbs steeply with income: 65+ units in the middle fifth paid 2.2% of income in federal tax, while the top fifth paid 15.2% and the top 5% paid 19.5%.

Three planning points follow from the table. First, retirees below about $35,000 of income almost never owe federal income tax, so withdrawals that keep income in that range carry little or no federal cost. Second, the fourth fifth is where tax switches on: 85.5% owe, but at a median of only $5,416, because taxable income usually sits in the 10% and 12% brackets. Third, the top fifth carries 84.0% of the group’s tax. That is the group whose required distributions and pensions push income into the 22% and 24% brackets, which in 2026 run to $211,400 and $403,550 of taxable income on a joint return (IRS 2026 adjustments).

Rates on income are lower than bracket rates because deductions and untaxed Social Security shrink the base. A fourth-fifth household paying 6.2% of income may still face a 12% or 22% rate on its next dollar, the familiar gap between an average rate and a marginal rate.

Do older retirees pay less tax than younger retirees?

Yes: the share owing federal income tax falls from 58.6% at ages 65 to 69 to 37.4% at 80 and older, and the federal rate falls from 11.9% to 8.6% of income.

Work, not age, drives most of the gap. Units 65 and over with any earnings owed tax 85.8% of the time; fully retired units owed 33.0% of the time and paid 7.4% of income. As households age, wages disappear and Social Security rises to 41.9% of income after 80, which keeps more income below the Social Security thresholds.

The pattern can reverse for households with large pre-tax accounts. Required minimum distributions begin at 73 for those born 1951 to 1959 and 75 for those born 1960 or later, and the required percentage rises each year, so a retiree whose IRA keeps growing can see taxable income increase in their late 70s while their peers’ income falls. The RMD tax bomb report quantifies how large that effect becomes.

What income do retirees actually pay tax on?

For returns with a primary taxpayer 65 or older, pensions, annuities and IRA withdrawals make up 39.2% of AGI, more than wages (21.2%) and more than taxable Social Security (14.2%).

The comparison with ages 55 to 64 shows what retirement does to the tax base. Wages fall from 64.9% to 21.2% of AGI, and pre-tax retirement withdrawals more than double their share. Each of those dollars is taxed as ordinary income, and each one can also pull more Social Security into AGI, as covered in taxation of Social Security benefits.

Capital gains, dividends and interest together account for 24.1% of 65+ AGI. Qualified dividends and long-term gains are taxed at preferential rates, and 65+ filers get a larger standard deduction. Together those help explain why the 65+ group’s share of income tax before credits (22.0%) trails its share of all AGI (22.3%), while the 45 to 54 and 55 to 64 groups pay a larger share of tax than of AGI.

The average rate on 65+ AGI (14.7%) sits close to the all-return figure of 14.9% because it is dollar-weighted, so high-income returns dominate it. The CPS figures above, which measure tax against all income including untaxed benefits and include nonfilers, show the experience of the typical household more accurately. Required withdrawals add to that income; see the average RMD amount by age.

How has the tax bill for retirees changed since 2013?

Over ten years, the 65+ group’s share of federal income tax rose from 17.9% to 22.0%, and the share of returns showing tax rose from 70.3% to 76.0%.

Two forces explain the trend. The number of 65+ returns grew 35% as baby boomers aged, and the share of benefits counted as taxable climbed from 44.9% to 55.0%. The second effect is a policy choice: the $25,000 and $34,000 single thresholds and $32,000 and $44,000 joint thresholds were set in 1983 and 1993 and have never been adjusted for inflation, so cost-of-living increases steadily pull more benefits into taxable income.

The 2025 to 2028 senior deduction works in the other direction. It adds $6,000 per person 65 or older on top of the $1,650 per spouse (or $2,050 single) additional standard deduction, and the IRS phases it out above $75,000 of modified AGI for single filers and $150,000 for joint filers. How the two deductions combine is detailed in the 2026 senior deduction guide.

Worked example: how is a typical retired couple’s tax figured in 2026?

A hypothetical couple with $99,000 of total income, close to the $101,173 median for 65+ joint filers in the CPS tabulation, owes about $3,806 of federal income tax in 2026, or 3.8% of income.

The couple is in the 12% bracket, yet the next dollar of IRA income costs more than 12 cents. Each extra $1,000 withdrawn adds $1,000 to AGI plus $850 of newly taxable Social Security, so tax rises by about $222, an effective marginal rate of 22.2%. That continues for roughly the next $9,900 of withdrawals, until 85% of benefits are taxable, after which the rate drops back to 12%.

The same couple with $48,000 of benefits would owe no federal income tax until other income passed about $31,600. With higher income, two more thresholds appear: the senior deduction phases out above $150,000 of modified AGI, and Medicare premiums rise above $218,000 for joint filers in 2026 (CMS), which the 2026 IRMAA brackets guide lays out.

Where do Roth conversions fit for retirees with higher incomes?

Roth conversions matter most for the fourth and top fifths, the households that pay nearly all retiree income tax and whose RMDs are still ahead of them. Some of these households also relocate; see where retirees are moving and the income they take.

Converting adds taxable income now in exchange for tax-free withdrawals later, so the analysis compares today’s marginal rate with the projected rate once RMDs, Social Security and possibly a surviving spouse’s single brackets apply. Retirees in the years between leaving work and starting RMDs often have their lowest taxable income, sometimes in the 10% or 12% bracket, which is the retirement tax window. Conversions also count toward the AGI that sets Social Security taxation, the senior deduction phase-out and IRMAA two years later, so a financial professional can model the full cost with Roth conversion tax arithmetic rather than the bracket rate alone.

For households in the lower three fifths, where federal tax is near zero, the calculation often looks different: future withdrawals may also face little tax, and state rules, covered in states that don’t tax retirement income, may matter more. The full set of levers is in tax planning for retirees.

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This article is for educational purposes only and is not individualized investment, tax, or legal advice. Consult a qualified professional about your specific situation.