Reduce Or Eliminate Tax On Your Social Security Benefits
~ By Rick Kelly, CSA ~
Many retirees today are paying taxes on their Social Security Benefits!
Because most retirees live on fixed incomes, this expense has a really negative impact on the quality of lifestyle!
In 1984, the IRS passed legislation that made up to 50% of Social Security Benefits taxable. Single tax return filers that have income between $25,000 – $34,000 and joint tax return filers that have income between $32,000 – $44,000 are included.
In 1993, the IRS passed additional legislation making up to 85% of Social Security Benefits taxable. This legislation affects single tax return filers that have income exceeding $34,000 and joint tax return filers that have income exceeding $44,000.
To calculate the taxable amount of Social Security Benefits, three categories of income are included:
- All income from pensions, wages, interest, dividends, capital gains, rents, royalties, etc.
- All interest from tax-free investments.
- 50% of the actual Social Security Benefits.
When the three categories added together exceed the thresholds, Social Security Benefits become taxable.
For example, assume a single tax return filer has the following assets and annual income:
The total income adds up to $33,400 which exceeds the $25,000 threshold. Using the IRS Formula, $4,200 of the Social Security Benefits are taxable.
However, the good news is that there are strategies where retirees can reposition some of their savings from taxable and tax-free investments into tax-deferred savings and pay little or no tax on their Social Security Benefits.
For example, if $365,000 was repositioned into tax-deferred savings at 3%, the taxes on Social Security Benefits would be eliminated, but still earn interest of $10,950!
If you are paying taxes on your Social Security Benefits, review your sources of income. Frequently, the earnings from bank, investment and tax-free savings are the reason and a simple reposition of assets into tax deferred savings can fix your tax problem!
Rick Kelly
Rick Kelly is a Certified Senior Advisor with Futurity First-Summit Financial Group in CO. He helps retirees to secure their retirements. To request A FREE “Social Security Worksheet” call his toll-free 24-hour resource line right now at 1-877-596-8233 or email him at rickkelly@ffig.com.
