When it’s finally time for you to retire, paying your taxes may be the last thing on your mind. But taking a proactive approach to understanding how your income will be taxed can help you get the most from your money — and your golden years.

Determine How Social Security Will Be Taxed

One of the first questions you should ask as you prepare to retire is whether your Social Security benefits will be taxed. This depends on your combined income, which the IRS defines as your adjusted gross income (your total income minus specific deductions) plus non-taxable interest and half of your Social Security benefits.

Here’s the breakdown:

If you file a federal tax return as an individual and your combined income is:

• Between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits.
• More than $34,000, up to 85 percent of your benefits may be taxable.

If you file a joint return, and you and your spouse have a combined income that is:

• Between $32,000 and $44,000, you may have to pay income tax on up to 50 percent of your benefits.
• More than $44,000, up to 85 percent of your benefits may be taxable.

Understand Tax Implications of Taking Benefits Early

If you elect to receive Social Security benefits before your full retirement age, your benefits will be reduced a fraction of a percent for each month before your full retirement age. Beginning the month you reach full retirement age, your earnings will not reduce your benefits no matter how much you earn.

In addition, if you make withdrawals from an individual retirement account (IRA) before you reach 59 ½, the payments are generally considered an early distribution, and you will likely be subject to an additional 10 percent tax.

Consider Income from Retirement Plans and Part-time Work

How you pay taxes on the funds you withdraw from your retirement savings account depends on the terms of your individual plan. Usually the entire distribution is taxable, unless you have a Roth IRA or have made after-tax contributions. In these cases, distributions are generally taken tax-free unless a withdrawal penalty or other tax-triggering rule applies.

If you are receiving Social Security benefits, consider your combined income before you decide how much to take out of your retirement account. This also holds true for part-time work, as the amount of income you earn each year can impact how your Social Security benefits are taxed.

While you are largely in control of how much of your retirement savings you withdraw, the IRS generally requires that you take a required minimum distribution every year once you turn 70 ½.

Retirement can also change the way you take tax deductions. If you don’t itemize your deductions, you can get a higher standard deduction amount if you are 65 or older on the last day of the tax year.

While your retirement years may lead you to surprising new places, preparing and budgeting in advance can help you avoid surprising tax burdens. For tools to help you prepare, use our Save for Retirement Calculator or visit the Regions Tax Center.