He Pulls $30,000 From His IRA to Fix His Roof. Then Utah Takes Another $538 Bite Out of His Social Security Tax Credit
A retiree pulls money from his IRA for a new roof and assumes his Social Security credit stays intact, not realizing Utah quietly links the two decisions in a way that costs him hundreds of dollars he never saw coming.
Picture a 66-year-old single retiree in Salt Lake City. He collects $30,000 a year from Social Security and a $20,000 pension. This year he plans to pull $30,000 from his IRA for a new roof and some extra cash in checking. He knows Utah taxes Social Security, and he knows a state credit offsets that tax for most retirees. He has no idea the IRA check is about to reduce that credit.
Careful people miss this because the two choices feel unrelated. Social Security shows up on its own schedule, and an IRA withdrawal feels like a private savings decision. Utah’s tax return adds them together into one pool of income.
A Utah Credit That Fades Past $54,000
Utah is one of less than a dozen states still taxing Social Security in 2026, at a flat 4.45% rate. To offset that, the state offers a nonrefundable credit roughly equal to the Utah tax on your benefits. Single filers get the full credit until their modified adjusted gross income (MAGI) (federal AGI plus a few add-backs) reaches $54,000.
Past that line, the credit drops by 2.5 cents for every extra dollar of income. That works out to $25 for every $1,000.
While the credit is being phased out, each additional dollar can face a combined Utah tax hit of 6.95%, until the credit runs out.
How a $30,000 Withdrawal Adds $50,000 to His Income
Social Security’s earnings limit, set at $24,480 for 2026 for people who claimed early, counts only paychecks from work. His IRA withdrawal never impacts it, so his monthly benefit keeps arriving in full. Utah’s credit measures income much more broadly.
Without the IRA money, only about $5,350 of his benefits are federally taxable. That puts his income near $25,350, well inside the full-credit zone.
Then the withdrawal lands. Once a single filer’s income passes $34,000, federal rules can tax up to 85% of benefits. The IRA money pulls $25,500 of his benefits into taxable income.
His income rises to about $75,500. A $30,000 withdrawal raised it by roughly $50,150.
That leaves him $21,500 over the line, and the phaseout cuts his credit by about $538. Out of a full credit near $1,135, he keeps about $597.
Splitting the Withdrawal Saves the Whole Credit
Now suppose he takes $15,000 this year and the same amount next year. In each year, roughly $18,100 of his benefits become taxable and his income comes in near $53,100, just below the line. He keeps the full credit, about $805, both years.
He still takes out the full $30,000. He simply spreads it across two tax years, and Utah rewards that kind of patience.
Leave yourself a buffer. In this example he has only about $900 to spare, and the 2027 cost-of-living raise is currently tracking at 3.5%-3.6%. A bigger benefit next year would push his income up a little, so the second withdrawal might need to reduce slightly.
Why Withdrawals in Your Mid-60s Shape Your 70s
Spreading out withdrawals now pays off later. For someone who’s 66 in 2026, required minimum distributions (RMDs) begin at age 75, and they’re based on your IRA balance. Steady, moderate withdrawals in your mid-60s leave a smaller balance and smaller forced withdrawals later. That makes it easier to stay near Utah’s line in the years when you lose control over how much comes out.
Steady withdrawals also tend to keep your federal bracket lower than one big lump would. The planning that protects the Utah credit usually helps on the federal return too, and it skirts a handful of IRS rules that quietly drain retirement accounts (we mapped out the worst of them in a free guide here: The Retiree’s Tax Trap Map).
What to Run Before You Request the Check
Before a large IRA withdrawal, estimate the share of your Social Security that becomes taxable, then add your other income. If the total lands above $54,000, see whether splitting the withdrawal across December and January keeps both years under the line. This mistake is hard to fix later, because the withdrawal counts in the year the money leaves the account.
Also keep in mind that the size of the IRA check matters less than when you take it. A pension, part-time work, or a dividend payout can change these numbers, so check the math against your own return before you make the move.
Contact [email protected] for any questions or corrections.
Gerelyn Terzo is the author of dividend investing handbook "Dividend Investing Strategies: How to Have Your Cake & Eat It Too." A veteran financial journalist, she covers agri-finance for outlets like Global AgInvesting and the broader stock market and personal finance for 24/7 Wall Street. She began at CNBC and later helped launch Fox Business in New York. Gerelyn currently resides in Woodland Park, Colorado and dabbles in nature photography as a hobby.
