Most retirees sit in the 10% or 12% federal bracket, and many owe no federal income tax at all once deductions are applied. The tax bracket you are in when you retire is set the same way it was during your working years: your taxable income is run through seven progressive rates, and only the dollars inside each range pay that range’s rate. What changes in retirement is the income mix and the size of the deductions you can claim, especially once you turn 65.
2026 Federal Tax Brackets
For the 2026 tax year, the brackets for single filers and married couples filing jointly are:
- 10%: Up to $12,400 (single) or $24,800 (joint)
- 12%: $12,401–$50,400 (single) or $24,801–$100,800 (joint)
- 22%: $50,401–$105,700 (single) or $100,801–$211,400 (joint)
- 24%: $105,701–$201,775 (single) or $211,401–$403,550 (joint)
- 32%: $201,776–$256,225 (single) or $403,551–$512,450 (joint)
- 35%: $256,226–$640,600 (single) or $512,451–$768,700 (joint)
- 37%: Over $640,600 (single) or over $768,700 (joint)
These thresholds reflect the IRS’s 2026 inflation adjustments, with the underlying rate structure extended by the One, Big, Beautiful Bill Act signed in 2025.1IRS. Rev. Proc. 2025-32 Without that extension the 12% rate would have moved to 15%, the 22% to 25%, and the top rate from 37% to 39.6%.
What Retirement Income Counts
Your bracket depends on total taxable income, so figuring out which streams the IRS counts comes first. Withdrawals from traditional 401(k) plans and traditional IRAs are usually the biggest piece. Contributions went in pre-tax, so every dollar out is taxed as ordinary income.2Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts Pension payments from a former employer work the same way and arrive on Form 1099-R.3Internal Revenue Service. About Form 1099-R Interest from savings accounts and CDs and dividends from taxable brokerage accounts add to the total. Social Security benefits can be partially taxable under a separate formula covered below.
Income That Doesn’t Count
Qualified distributions from a Roth IRA are federally tax-free if you are at least 59½ and the account has been open at least five tax years.4Office of the Law Revision Counsel. 26 USC 408A – Roth IRAs Roth withdrawals also stay out of the provisional income calculation that governs Social Security taxation, which makes them useful for controlling your bracket. Interest on most municipal bonds is excluded from federal gross income, though certain private-activity and arbitrage bonds don’t qualify.5Office of the Law Revision Counsel. 26 USC 103 – Interest on State and Local Bonds Tax-exempt interest is still counted when the IRS decides how much of your Social Security is taxable, even though the interest itself is not taxed.
Deductions That Lower Your Bracket
Deductions turn gross income into taxable income, and retirees get a better deal than younger filers. The 2026 base standard deductions are $16,100 for single filers, $32,200 for married couples filing jointly, and $24,150 for head of household.
Filers 65 or older add another amount on top: $2,050 for unmarried filers, or $1,650 per qualifying spouse for married couples.1IRS. Rev. Proc. 2025-32 A married couple where both spouses are 65 or older adds $3,300 to the joint deduction.6Office of the Law Revision Counsel. 26 USC 63 – Taxable Income Defined
The New $6,000 Senior Deduction
From 2025 through 2028, taxpayers aged 65 and older can claim a new $6,000 deduction per person on top of the standard deduction and the age-based addition. A qualifying married couple filing jointly gets $12,000. The deduction phases out for modified adjusted gross income above $75,000 for single filers and $150,000 for joint filers. Both itemizers and non-itemizers can claim it, but married taxpayers must file jointly.7Internal Revenue Service. One, Big, Beautiful Bill Act – Tax Deductions for Working Americans and Seniors
In dollar terms: a single retiree aged 67 with income under $75,000 can subtract $24,150 before any tax applies ($16,100 + $2,050 + $6,000). A married couple both over 65 earning under $150,000 jointly can subtract $47,500 ($32,200 + $3,300 + $12,000). That shield is a big reason so many retirees land in the 10% or 12% bracket even when gross income looks substantial on paper.
Working the Math
Take a married couple, both age 67, with $80,000 in combined retirement income for 2026:
- Gross income: $80,000
- Standard deduction: $32,200
- Additional for age (both 65+): $3,300
- New senior deduction (both 65+): $12,000
- Total deductions: $47,500
- Taxable income: $32,500
That $32,500 puts them in the 12% bracket for joint filers. They don’t pay 12% on all of it, though. The first $24,800 is taxed at 10% ($2,480), and only the remaining $7,700 is taxed at 12% ($924). Total federal tax comes to about $3,404, an effective rate of roughly 4.3% on $80,000 of income.1IRS. Rev. Proc. 2025-32
Marginal Bracket vs. Effective Rate
The distinction matters more in retirement than during working years. Your marginal bracket is the rate on your last dollar of income. It’s the number that should drive decisions like whether to take an extra IRA withdrawal or convert traditional funds to a Roth. Your effective rate is what you actually pay as a percentage of total income. Confusing the two can lead people to leave money in tax-deferred accounts longer than needed, worried about a tax hit that is smaller than they think.
How Social Security Fits In
Social Security has its own taxation rules that pull benefits into your income at a variable rate. The IRS uses “provisional income” to decide how much is taxable: your adjusted gross income, plus any tax-exempt interest, plus half of your annual Social Security benefit.8Office of the Law Revision Counsel. 26 USC 86 – Social Security and Tier 1 Railroad Retirement Benefits
For single filers:
- Below $25,000: benefits are not taxed
- $25,000–$34,000: up to 50% of benefits may be taxable
- Above $34,000: up to 85% of benefits may be taxable
For married couples filing jointly:
- Below $32,000: benefits are not taxed
- $32,000–$44,000: up to 50% of benefits may be taxable
- Above $44,000: up to 85% of benefits may be taxable
These thresholds have never been adjusted for inflation, so more retirees cross them every year. “Up to 85% taxable” doesn’t mean an 85% tax rate on benefits. It means as much as 85% of the benefit amount gets added to your other income, then taxed at whatever bracket that puts you in.
Capital Gains Use a Different Schedule
Selling investments in a taxable brokerage account triggers capital gains, which are taxed under a separate, more favorable rate schedule. Long-term capital gains and qualified dividends for 2026 use three rates:1IRS. Rev. Proc. 2025-32
- 0%: taxable income up to $49,450 (single) or $98,900 (joint)
- 15%: $49,451–$545,500 (single) or $98,901–$613,700 (joint)
- 20%: above $545,500 (single) or above $613,700 (joint)
The 0% rate is worth knowing about. A married couple whose taxable income (including the gains themselves) stays below $98,900 pays no federal tax on long-term gains and qualified dividends. High-income retirees may also owe a 3.8% net investment income tax once modified adjusted gross income clears $200,000 single or $250,000 joint.9Internal Revenue Service. Topic No. 559, Net Investment Income Tax
RMDs Can Push You Into a Higher Bracket
Starting the year you turn 73, you must withdraw a minimum amount each year from traditional IRAs, 401(k)s, 403(b)s, and similar tax-deferred accounts.10Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs Required minimum distributions (RMDs) add to your taxable income whether you need the cash or not, and they can lift you into the next bracket in later retirement.
The IRS calculates each year’s RMD by dividing your prior-year December 31 balance by a life expectancy factor from its tables. At age 75 the factor is 24.6, so a $100,000 balance produces an RMD of about $4,065.11Internal Revenue Service. Publication 590-B (2025), Distributions from Individual Retirement Arrangements (IRAs) The factor shrinks with age, forcing larger withdrawals over time. Missing an RMD costs 25% of what you should have taken out, dropping to 10% if you correct it within two years.10Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
Roth IRAs are the exception. The original account owner is never required to take RMDs from a Roth IRA, which is one more reason Roth conversions during the lower-income years between retirement and 73 can help hold your bracket down later. If you are still working at 73 and participate in your employer’s 401(k), you can delay RMDs from that specific plan until you actually retire, unless you own 5% or more of the company. Traditional IRAs get no such delay.