HOW SOCIAL SECURITY COULD RAISE YOUR TAXES
Matt Logan | November 28, 2018
As you prepare for retirement, one of the last things you’d probably expect is to face a higher tax rate. You’re on a fixed income, after all, with just a fraction of the income you had while you were working. Many retirees are surprised to find out that up to 85% of their Social Security benefits can be taxable. Because of the unique way Social Security benefits are taxed, retirees can face a massive effective tax rate. If you haven’t figured Social Security taxes into your saving strategy, that mistake could leave you with a significant income shortfall once you retire.
Credit: Social Security Administration How taxes on Social Security benefits work To figure out if you have to pay taxes on your Social Security income, add half of your Social Security benefits to the total of your other retirement income. If the sum is between $25,000 and $34,000 for singles or $32,000 and $44,000 for couples, up to half of your Social Security benefits are taxable. If your income exceeds $34,000 for singles or $44,000 for couples, you will have to pay income tax on up to 85 percent of your Social Security benefits.
How tax on Social Security can cause a massive increase in your taxes If you are single and have $1,500 in monthly Social Security income and monthly withdrawals of $2,000 from a traditional IRA or 401(k) account, your countable annual income would be $24,000 plus half of $18,000 for a total of $33,000. Because that is below the $34,000 threshold, only 50 percent or $9,000 of your $18,000 Social Security income would be taxable. Your total taxable income would be $33,000 and you would be taxed at a 12% rate (according to 2018 Federal tax brackets). Working from that example, if you took an additional one-time IRA withdrawal of $1,500, it would raise your total countable income to $34,500. Since that is over the 85 percent threshold, $15,300 of your Social Security benefits would be included in your taxable income now. You would have added $1,500 to your taxable income by IRA rules, plus an additional $6,300 of your Social Security benefits would be taxable. Your total taxable income would now be $40,800, raising you to the 22% tax bracket. Because of the way that additional $1,500 in IRA income would effectively increase your tax burden, you could actually end up having less income at your disposal. Credit: The Fiscal Times / Gallup How to lower Social Security – 3 tax tips for retirees
Once you understand how Social Security could raise your taxes, the importance of retirement income strategies becomes clear. If you would like more Social Security tax tips or help planning tax-saving strategies for your retirement, reach out to Matt Logan at www.mattloganinc.com or call 336-540-9700. We will assess your income sources and options to create a retirement income plan that will help you enjoy the best lifestyle possible. Matt Logan is a Representative with Matt Logan Inc and Summit Brokerage and may be reached at http://www.mattloganinc.com/, 336-540-9700 or [email protected]. Matt Logan Inc. is an independent firm with Securities offered through Summit Brokerage Services, Inc., Member FINRA, SIPC. Advisory services offered through Summit Financial Group Inc., a Registered Investment Advisor. Summit Brokerage Services, Inc., its affiliates and Matt Logan Inc. do not give tax or legal advice. You should consult an experienced professional regarding the tax consequences of a specific transaction. These are the views of Matt Logan Inc, and not necessarily those of Summit Brokerage Services, Inc. and any of its affiliates and should not be construed as investment advice. From https://localseo0.blogspot.com/2018/11/social-security-could-raise-your-taxes.html from From https://juanitasmith0.blogspot.com/2018/11/social-security-could-raise-your-taxes.html from https://juanitasmith0.wordpress.com/2018/11/29/social-security-could-raise-your-taxes/ from https://angelawalker0.blogspot.com/2018/11/social-security-could-raise-your-taxes.html
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