January 10, 2022 - Douglas Myser

Taxes on Social Security income. We are often asked about different types of income, and whether they are taxable or not. Here we are going to discuss how to avoid taxes on Social Security income. You usually onlyhave to pay taxes on your Social Security if you have other inomce and exceed certain oncome thresholds. The Social Security Administration defines this as the sun of: Your adjusted gross income-Your Non-Taxable interest-One half of your Social Security benefits if you file an individual tax return and your combined income is between $25,000 and $34,000, you may owe income taxes on 50% of your Social Security benefits. Earn more than that and it can go up to 85% of your benefits could be subject tot taxes. Some ways do exist to lower what you owe. Taxes on Social Security income.

One of the methods is to delay collecting your benefits. It may be the simplest way to avoid being taxes on Social Security, if you are still earning significant amounts outside of your Social Security earnings. Another way is to not work, or work less, and make sure that you calculate how much work you can do prior to being taxed. Its ok to work and earn money, just be aware of the smounts you are earning, and how much you have left prior to the taxes kicking in. Keeping track is a very simple way to avoid these taxes.

Avoid municipal bonds. A lot of people turn to municipal bonds as a way to lower their tax bill. Interest earned from these types of investments are not subject to income taxes. However, municipal bond interest is included in the formula that determines whether you will pay taxes on your Social Security benefits. Bondholders should be aware of these potential tax consequences when deciding between tax free muni bonds and other kinds of fixed income investments. Keeping track and good records is your best bet tod determine where you are at in owing tax or not owing tax.