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An important issue for retirees is paying income taxes on their Social Security retirement income. If the only income you had during the year was Social Security, then the income benefit is not taxable. However, if you had substantial investment income, interest income or wages during the year that exceeds a certain base amount, you may have to pay federal or state income tax on a portion of your Social Security retirement income. A simple repositioning of assets may mitigate taxes on your Social Security income.