Many people expect Social Security to arrive tax-free, and then see a tax bill on it. Up to 85% of your benefit can count as taxable income. That doesn't mean a tax rate of 85%. It means as much as 85% of the benefit gets added to your other income and taxed at your regular rate.
The IRS uses a number called provisional income to decide. Add your adjusted gross income, any tax-exempt interest, and half of your Social Security benefit. For a single filer, up to $25,000 means none of the benefit is taxed. Between $25,000 and $34,000, up to 50% can be taxed, and above $34,000, up to 85%. For married couples filing jointly, the lines sit at $32,000 and $44,000. These thresholds were set decades ago and have never been adjusted for inflation, so more retirees cross them every year.
Here's an example. A single retiree gets $24,000 a year from Social Security and takes $30,000 from an IRA. Provisional income is $30,000 plus half of $24,000, which is $42,000. That's $8,000 over the top line. The formula taxes 85% of that $8,000, which is $6,800, plus $4,500 from the middle band, so $11,300 of the benefit is taxable. That's about 47% of the benefit. At a 12% bracket, that's roughly $1,356 of tax on money many people assumed was off limits.
Notice what drove that result. The $30,000 IRA withdrawal did it, and the Social Security check only came along for the ride. With a $20,000 withdrawal instead, provisional income would be $32,000, and only about $3,500 of the benefit would be taxed. That's a $7,800 difference in taxable benefit from a $10,000 change in withdrawals.
Where your other income comes from matters. IRA and 401(k) withdrawals count, and so do required minimum distributions, which start at 73 or 75 as covered in required minimum distributions. Wages count too. Qualified withdrawals from a Roth IRA don't count in adjusted gross income, which is one reason people convert some traditional money to Roth in the low-income years before they claim. The timing of that claim is covered in claiming at 62, 67, or 70.
You can ask Social Security to withhold tax from your checks by filing Form W-4V. The choices are 7%, 10%, 12%, or 22%. Otherwise you'll owe at filing time, or you'll need to make quarterly estimated payments, and a surprise in April is the usual way people find out.
As I understand it, Oregon doesn't tax Social Security benefits at the state level, though the federal tax still applies. I'm a licensed insurance broker, not a CPA, so have a tax professional run your own numbers, and keep in mind the thresholds could change if Congress changes them.
Next January you'll get a form called the SSA-1099 showing what you received, so add half of that figure to your other income and compare the total with the thresholds above.